Buying an automobile is the biggest purchase, other than a house, that most people ever make. Due to the high cost of automobiles, most people need a loan to complete the transaction. Here are three things that buyers should consider before they sign any car financing papers.
Other Loan Options
Many people will go to an auto dealership, pick out the model in their price range, and begin negotiating with a salesman. What people do not realize is that dealerships are limited in the deals they can offer by their own banks. While many salesmen would love to offer every customer zero percent financing for six years, they just can’t. In order to save money and increase their power during negotiations, buyers need to secure outside car financing before they ever walk onto the dealership. This can commonly be achieved through your bank or local credit union. In some cases, you might be able to obtain a better rate from your own institution.
If you purchase a new vehicle every few years, it is possible that leasing an automobile might be a better option for you. Monthly leasing rates are generally lower than purchase rates. Furthermore, you generally get to drive a more expensive model than you would be able to buy outright. On the downside, when your lease term ends, you do not own the vehicle. Also, if you drive long distances, your lease might penalize you for going over the yearly mileage allotment. Whichever choice is better for you, it is good to consider leasing as a potential car financing option.
New Versus Used
When purchasing a sedan, truck, or SUV, one of the first choices people have to make is whether to buy new or used. New models offer the latest technology, a warranty, and will often have attractive loan terms available through the dealership. Used vehicles can offer much of the performance and reliability of new autos, for a lower initial cost. The average cost of a new model is roughly $30,000, while a used auto will run about $15,000. If the purchase will use up most or all of your disposable income, a new vehicle’s warranty will ensure you are not faced with any unexpected repairs. On the other hand, if you can set aside some of the money a used auto will save you, the car financing payments will be lower, and you can deal with any fixes needed. Finally, the average driver of a new vehicle will own it for about six years, while the average driver of a used vehicle will own it for a little less than four years.
In conclusion, due to the expensive nature of automobiles, obtaining a loan is almost always necessary. However, as long as the buyer considers all aspects of the car financing, he or she will be able to obtain a good deal on the car in question.