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So you’re on the hunt for a car, eh? There are certain steps to take whether you’re buying your first car or 50-11th car (yes — this is a Ying Yang twins reference.)
One thing you don’t want to do is go out to a dealership and buy a car without considering your options. That’s how you can get stuck in a not-so-great deal.
Here are five things you need to know before buying:
Go Over the Numbers
Think about the monthly payment you can afford. BankRate has an auto loan calculator you can use to calculate a monthly payment by inputing a loan amount and interest rate.
The car payment shouldn’t eat up most of your disposable income.
So if you have $600 to spare after your current bills, you shouldn’t be looking for a car payment that’s $500. That’s talking BMW taste on a Toyota budget.
What if you have maintenance issues? What about emergency savings? You need some breathing room in your budget to cover unexpected expenses.
Loan calculators you find online can provide you with payment estimates. You can compare actual payments and prices different loan amounts when shopping with lenders. Don’t sign a deal with a lender until you’ve read all the fine print.
Look at the fees and compare the total cost of the loan. Sometimes longer term loans can look less expensive because you have a small monthly payment. However, a longer term loan can cost more money over time because of accumulating interest.
Shop for a Loan FIRST
This is the most important piece of advice you need to know when shopping for a car. Do not just go straight to the dealership looking for a car. Dealerships can convince you to get financing through them that costs far more than another auto loan would be. Ultimately, it’s a car salesman’s job to close a deal that benefits the dealership.
Look for auto loan rates beforehand to see what’s available for your credit. Many lenders will allow you to prequalify for a loan online without a credit inquiry. You can compare rates and see how much lenders are willing to give you. Your present bank or credit union may even offer deals to existing customers or members so talk to them first.
Don’t Tell the Dealership You Already Have Financing
So you’ve looked at your numbers to decide what you can afford and prequalified for a lan.
Big tip: If you go to a dealership for a car, do not tell the dealership that you have already qualified for a loan elsewhere. Dealerships typically get an incentive from the bank partner that gives you financing through the dealership.
Because of the incentive on the backend, dealerships may be willing to lower the price on the car because the cost will be recouped in another way.
Remember — It’s a negotiation. Don’t play all of your cards at once. Hold out with some information until you get the very best possible price. There’s a good chance they’re playing the same game with you.
Go Car Shopping Near the End of the Month
Lastly, the end of the month is when dealerships are usually trying to meet sales goals. You may be able to strike up a deal because it’s crunch time.
Buying a car is a major purchase that can get a bit stressful so take your time. Consider all options for financing if you’re not paying in cash. Shop around for cars as well to land the best quality car for the best price.
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