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Clear & Simple Home > Singles > Buying a Car > Paying for It
Paying for It**
Unless you have the cash to buy a car outright, you'll need
to find someone to front you the money. If you're smart, you'll do that before you start negotiating. Plenty of lenders will pre-approve you for a certain
loan amount based on your income and credit history. That way, you'll know
exactly how much car you can afford, and you'll be able to leverage your
financing deal against the financing offered by the dealership.
Getting the financing: There's only one hard-and-fast
rule when it comes to financing: go with whoever gives you the best deal. There
are plenty of options open to you, including the following:
- The
dealership: This is as easy as it gets - you buy the car, then
you walk 15 feet to the financing person's office, and you set up your
payments. Of course, the rates you get may not be the best, so you need to
shop around for a loan beforehand, to make sure it's a good deal.
- Banks
and credit unions: The same bank that keeps your money in a vault
will lend you what you need to buy a car, and you'll usually (but not
always) get a better deal than the dealer is offering. Credit unions may
have even better rates. Either way, you'll probably need a 10-20% down
payment on this kind of loan.
- The
Internet: As with everything else these days, you can shop for
car loans on the Internet. You miss out on any kind of personal
relationship, but you can get quick approval and very competitive pricing.
Important finance vocabulary: Don't let
yourself get derailed by all the lingo when it comes to securing financing.
Here are a few key terms to familiarize yourself with:
- Total
price: Basically, it's just that - the price you and the dealer
finally agree on, minus any rebates. The dealer will calculate tax based
on this amount.
- Down
payment: This is what you put down to symbolize your intent to
pay off the rest of the vehicle. The more you pay up front, the less
you'll pay every month, and the lower your interest rate may be.
- Interest
Rate: This is the rate a lender charges you for borrowing money.
A higher rate will increase your monthly payments.
- Term: This is how long you'll be paying off the loan. The longer the term, the
smaller your monthly payment, but the more total interest you will pay.
The power of a trade-in: If you've already
got a car or truck, ask about trading it in. Depending on what your car is
worth, you may be able to use it as a down payment.
Then again, you may not get much at all for it - it all
depends on what the dealer thinks he can re-sell it for, either on the lot or
at a used-car auction. Before you head to the dealership, check the Kelley Blue
Book to see what your car is worth. If the dealer is offering you less than you
can get by selling it yourself, the trade-in becomes less attractive. As
always, research is the key.
**Content courtesy of Visa's What's My Score  program. |
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