Car Loan Tips
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| car loan tips |
It is very important to know the exact financial situation so that the amount available to go for an additional expenditure can be determined. This is the first and most important step in the car buying process. It also shows the extra payments you can afford monthly. You must know how much you can spend before you can determine what you can afford. When you decide to go for a new or old car then prepare fully before you go for the purchase. Let us see how you can assess your monthly income and expenditures. Knowing your income will also help decide the amount of loan that may be available for you.
Know your income and expenditure
First of all, you need to have a list of all the monthly income and expenditure. Its very easy just calculate, Add up all of your fixed monthly expenses, such as your rent/mortgage, phone bill, etc. Subtract that from your net income (total income from all sources). Then subtract your estimated extraneous expenses, such as food, gas, and entertainment, whatever. The result should be an amount of money you can play with.
Amount available = Total Income - Total Expenditure
From that, you need to remember that buying a car involves more than a down payment and monthly payments. In your budget, you will need to include licensing, registration and other hidden costs, as well as monthly insurance costs, gas and maintenance.
Once the total income and expenditures are compared and the monthly residual amount is determined you are all set to go for the loan process. Roughly the amount which can be used as a car loan payment is 20% of the total income of the individual.
2. Decide which car you want
Now that you have settled on a monthly allotment, now you can look at which vehicle fits into your price range.
This is really a matter of personal choice, but a good criterion is to go buy by looking at what your needs are. If you have a family then you need to have a different range of cars like plenty of affordable, safe and reliable minivans and station wagons on the market. A compact segment of cars is best for singles and those who commute or do a lot of city driving. Do you use your vehicle for work-related tasks, such as hauling, delivery, etc? Check out the many lights and heavy-duty pickup trucks and vans. Are you suffering from the Midlife crisis? There are several convertibles and sports cars that will make you feel young again.
Compact Cars have very good gas mileage and are the most cost-effective segment of cars in the market. If you plan to go for road trips then opt for one which has more of cargo space and has lots of cup holders. If you plan to go off the road then SUV's are the best option for you. Check out for add-ons in the SUV's Narrow down your choices by deciding on the features that you need.
Once you've narrowed your choices down to a couple, it's time to do some car research.
3. Research and save:
After the initial know how now is the time for some real work.
Sources for the car research: Internet and newspapers, contact car dealerships, credit unions, and local banks to see what kind of deal you can get. Knowing what a car dealer's competitor is offering can be helpful only to ease the negotiating process.
Look at interest rates. You must get hold of the lowest possible interest rate, as it will help you pay less in the long run. Beware of a car dealer who insists on lower down payments but in the long run, you end up paying more. Look for the dealer's incentive percentage: Even if the dealer is selling the car at the invoice price so also he will get a good percentage out of the sale. Insist on some extra benefits out of the dealer's incentive in the form of some accessories.
Look for rebates: You should also look out for rebates. Beware when incentives are offered as this generally means that the manufacturer wants to get rid of slow-selling cars or reduce the inventory. They may also offer the buyer a cash off and a low financing rate, do not get distracted and closely examine the offer and try to calculate the total benefit out of the deal.
4. Dealing with the dealer
Now that you have understood what kind of rate you will be offered, you now want to go out to the car dealerships. Negotiate the deal with dealer by analyzing the information you have like an idea of what kind of car you want, how much you can spend and what kind of perks you can get. Also, you can negotiate by comparing the different car dealerships offerings. So the rule is, the more you know, the better off you'll be. But remember: Car dealers are professionals and will use all the tricks on you during the negotiation process as they do it every day. You will be treated as a novice but they least know that you have researched a lot and are able to judge the things and point to the tricks. The car dealers aren't going to be easy on you, nor are they going to point out all the ways you can save money. It's up to you to find all of those.
Also, remember that you are in no way in possession of the dealers and can walk out of the office at any point if you think that that the deal does not suit you. Also, don't let the dealer choose the deal for you but you must do it independently. Be relaxed and comfortable you know all the information and that you hold all the cards.
