Buying a car can be an exciting experience. It can also be daunting and expensive, especially if you’ve never bought a car before or have limited experience with car buying and dealerships. That’s why we’ve put together this helpful list of tips and terms you should know before walking onto a car lot. You’ll be able to walk out with a great car at a great price once you understand these terms and ideas.
Before you ever step into a car dealership, make sure you understand what your credit score is. Dealerships often advertise very good interest rates on new cars, but often these rates are only available to those with credit scores of 750 or better, and you will only see that in the fine print. Those with credit scores of 700 or higher can usually get pretty good rates, but anything below that usually comes with much high interest rates. And almost anyone can get a car loan regardless of their credit score or credit history because cars are relatively easy to repossess if you miss payments. So before you go looking for a car, make sure you know what your credit score is and what kind of rate you should be getting. If your credit score isn’t as good as you’d like it to be, Experian.com has some tips to raising your credit score.
Get financing quotes before you shop
Even if you have amazing credit, it doesn’t hurt to look around for the best rates. For those with high credit scores, you can often find great financing rates directly from the dealer. If you have average credit, visit your credit union or bank and apply for a car loan before you shop. You can often find some of the most competitive rates with credit unions and local banks. You can also apply for car loans online if you want more options, but you won’t necessarily get the best rates.
Set a budget
One of the first things you should do when you start searching for a car is determine exactly how much you can afford to spend on loan payments each month. While it might be tempting to get a longer loan term so you can have smaller payments over the course of the loan, in the long run you’ll end up paying a lot more in interest. So while a shorter loan term might have higher payments, you won’t have to pay as much interest. Calculate how much you can afford to spend each month and then find the shortest loan term that will fit in that budget.
Consider extra expenses
In your budget, make sure you account for other common car costs such as car insurance and GAP Insurance. GAP, or guaranteed auto protection, Insurance, is protection to cover the “gap” between than an insurance company believes your car is worth and what you still owe on your loan if you’re in an accident and the car is deemed totaled. So if you still owe $8,000 on your loan, but the car is only worth $6,000, the GAP insurances covers you for that $2,000 that you would owe on the loan. For both GAP insurance and car insurance, make sure you shop around to find the best rates. And shop around for both of these annually, as rates can change from company to company every year.
Now that you know your credit score, have financing ready to go, and know what you can afford for your budget, it’s time to start looking for your new car. Whether you’re buying a brand new car, or one that’s just new to you, these tips will help ensure that you won’t get taken for a ride at the dealership.
Find more information on auto financing with these tips for saving on your car loan.