In purchasing a vehicle, negotiating the price is always part of the process. You’d want to get the best price for the car you’re planning to buy. Unless you already have all the expenses covered with your savings, you’ll probably need to borrow money too. An auto loan helps you in purchasing a vehicle that costs more than what you can afford with cash. You’ll pay it off over time by making monthly payments. Proper planning and careful research can help improve your chances of getting a vehicle and auto loan that fits your budget.

Below are some tips you can apply for your next purchase:

1. Determine Your Budget

Before you visit a local showroom, you need to set a budget first. Salespeople can make a car seem affordable through several options such as a long-term loan—when it’s not actually within your budget.

To determine whether you can actually pay for your car, you need to consider a few things:

• Downpayment

Generally, a larger downpayment means a smaller loan and lower monthly payments. It is recommended to put down at least 20% of the buying price to secure a favorable car loan term.

• Loan Terms

Although a longer term like 72 or 84 months means lower monthly payments, it can increase your interest costs and the total costs throughout the duration of the loan. Preferably, a short-term loan of 36 or 48 months is the best choice since it reduces the interest and the total loan costs.

• Monthly Payments

Your fixed monthly payments should be readily payable on your end to account for the unexpected events that could impact your income. You want your monthly auto payment to be less than your monthly income minus the costs of ownership, your living expenses, and any other debts you may have.

• APR

 Annual Percentage Rate or APR is the yearly interest rate that you’ll pay on your loan. A lower APR means lower interest costs.

2. Check Your Credit Score

Your credit reports can significantly affect the decision as to whether you’ll be approved for an auto loan and may also dictate your interest rates. A good credit score generally means a lower interest rate.

You can easily get credit reports from online credit bureaus. Carefully read through them. If you spot errors, contact the relevant bureau to correct them, ensuring that your credit report appears as favorable as possible.

3. Choose The Best Lender

Along with buying the right car is the responsibility of selecting a loan that’s suitable and practical enough to pay for the expenses. Remember that a lack of research can lead to wrong decisions.

Consulting multiple lenders from different companies will allow you to sift through the available options and choose the right lender and loan. 

• Direct Lenders

You can secure financing directly from a credit union, bank, or online lenders. In most cases, these lenders offer better deals. They usually give you preapproval on the loan amount and your interest rate, increasing your bargaining power at the dealership.

• Auto Dealership

In terms of convenience, an auto dealership loan is the best choice since you will enter into a financial agreement with the car dealership and skip a visit to a separate lender.

Most dealerships offer multiple financing options with incentive programs to sweeten the deal.

4. Skip The Unnecessary Insurance

Oftentimes, lenders will offer you various kinds of insurance to go with your loan. However, if you’re after the best deal on your auto loan, then you’re better off skipping this part especially if you have similar coverage.

Here are some of the common auto insurances offered:

• Liability insurance

It’s better if you purchase your own liability insurance since you will pay less than what your auto lender has to include in your loan.

• Collision Insurance

This may be required by your lender to cover the cost of vehicle repairs when you’re at fault in a car accident. Similar to liability insurance, you can buy this one on your own, usually for a lower price.

• Credit Insurance

This type of insurance covers your loan payments and protects your property if you lose a job, become ill or injured, or suddenly pass away. It’s a low-value add-on, but seldom a good idea since it’s more practical and cheaper to get individual life and disability coverage or obtaining them through your employer.

Conclusion

With the following tips, you can now shop around for a new car confidently without draining your wallet and bank account. Before signing on that dotted line, make sure that you’ve done your homework and carefully read the fine print. This way, you can buy your dream car without regret.