5 Money Saving Tips when Financing a Used Car — The Kind Tips - Tips for Life, Study, Work and Entertainment

5 Money Saving Tips when Financing a Used Car

5 Money Saving Tips when Financing a Used Car

After decide to buy a used car instead of a new one, you still need to think about to pay for the used vehicle once for all or finance it and pay for it monthly. Loan is a good choice, but the loans for used vehicles are typically higher in terms of interest rates, which increase your monthly payment. However, even at a high loan rate, you can still find ways to ensure yourself to get the best deal possible on the used vehicle.

1. Get your credit report ready.

If you can get a low or price rate for the used car loan, you can save money throughout the loan by lowering the monthly payments. Maybe you have poor credit history and the lenders can still finance you, but the bad credit rating results in higher interest rates. A credit score over 680 is considered to be competitive when you are choosing different finance rates available. You can get your credit report from website like MyFico.com and if your credit rating is low, you should improve it before purchase the car. You can boost the score by reducing the credit card balance or paying bills in time.

2. Decide the finance term.

Generally, car buyers prefer to keep the payments as low as they can; hence, they might want to opt for 60-month, or five-year financing. However, you should know that a loan term of 24 or 36 months help bring down the interest rate of the loan. Based on the fact that you can afford to pay higher monthly payments, you can choose to go in this way and pay off your vehicle early.

3. Consider co-signing.

The co-signing is a way to help you get approved for the vehicle loan application when your credit score is poor or you don’t have enough income to be qualified for the vehicle loan. The co-signer has legal responsibility for the car, but finally it is your responsibility to pay for the car each month. Of course, if you lose the job and the capability to make the monthly payments, the co-signer steps in and take over the responsibility for the loan.

4. Make a down payment.

Nowadays, cars depreciate very fast. If you are involved in car accident that seriously damaged the car or if the automobile is stolen, the insurance company will only pay for what the vehicle is worth. For example, if you own the lender $14,000 but the actual value of the vehicle is only $10,000, then you will have to pay for the extra $4,000 to the lender for the vehicle loan. If you can make a down payment of 10 % or even more, you will be able to alleviate owing more than the actual value of the car, and also help you get better finance rate. If you are not able to afford the down payment, think about gap insurance which compensates for the difference.

5. Look at the finance options carefully.

If you are working with honest dealers or auto finance companies, you will feel that they are trying to do everything possible to help you get a low finance rate on a used vehicle. However, sometimes the auto dealers increase the interest rate to increase their bottom line, explained by Cars Direct. You can secure your financing by visiting your bank or credit union to avoid such scams. If possible, get a quote from the finance department of the dealership and compare the quote with what you got from your bank.

*Image source: http://www.bmw.com/com/en/usedvehicles/information/financing.html

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