Do’s and Don’ts of Auto Finance
Do not Buy More than You Can Afford
When determining how much you can afford for a car payment, take a realistic inventory of your expenses. Write down everything you purchase for 7 days or two, that way you’ll be able to come up with an honest amount you can spend on your new car. Your credit score will be best if your expenses are simply 30% of your wages before taxes. You’re better off choosing a car you can comfortably afford over one you would need to stretch to make the payments on and putting money aside just in case of an emergency. One missed payment can hurt your credit and force you into a higher interest loan further down the line. As a matter of fact, FICO just recently brought out info about how your behavior affects your credit score.
Do not Go to the Dealership Before Knowing Your Credit Score
If you have no idea what your FICO (credit) score is, do not even step foot on the lot of a car dealer. There is no sense in spending all day looking at and test-driving cars only to get to the finance manager’s workplace and find out that your credit rating isn’t good enough to qualify for financing. Plus, knowing what your credit rating is beforehand might help you get financing through a private lender, which might get you a better interest than the dealer can give you. Many consumers are now trying online for financing before ever heading to the dealership. This gives them the freedom to negotiate with the dealer as a cash buyer; and in a good many cases, helps with getting a better deal.
Don’t Forget About the Expense of Auto Insurance
Before you pick a car, get insurance quotes. For young buyers or people with less than perfect driving records, insurance may cost as much as or more than your car payment. Remember that generally, the more you spend on your car, the higher your insurance bill will be, so just as you can produce the monthly payment on your dream car doesn’t mean you can really afford it. Many things effect your insurance rates together with your driving record, the sort of vehicle you are buying and the engine type to name a few.