Because cars depreciate quickly, they don’t make good investments. It’s best to buy a car with cash if possible, but if it isn’t, it’s important to consider the terms of the loan carefully in order to save as much money as possible. The following are some tips for making smart choices about financing a car.
Buy An Affordable Car
While buyers should look for cars that meet their needs and offer certain desired features, they should avoid the temptation to get the most expensive car they can get a loan for. Owning a luxury car, like a Mercedes for example, involves much higher expenses for parts and services than an economy car.
Shop Around For Interest Rates
Car buyers often find that the super-low interest rates dealers offer are only for customers who qualify with a high credit score. People with lower scores may have a harder time finding a good rate, but it’s worth shopping around to get the lowest rate possible. Most people can do better than dealer financing if they make the effort to shop.
Get As Short A Loan As Possible
The best way to save money on interest is to get the shortest possible loan. Although monthly payments are lower with a longer term, the buyer will be spending much more money on interest in the long run. In some cases, people find themselves continuing to pay off a car loan even after the car has gotten too old or too damaged to drive. Thus, short loans are much safer as well as being less expensive.
Save Up For A Down Payment
Making a down payment of 20% or more of the loan amount is another good way to save money on an auto loan. This helps to ensure that the car retains value, meaning that if the owner had to sell it, he or she would get at least enough money back to pay off the loan.
Car buyers with low credit scores should never assume that their only hope of buying a car is to pay exorbitant interest rates. To learn more about loans for consumers with poor credit, low incomes, or a lack of credit history, visit Consumer Portfolio Services.