Heading to used car lots instead buying a brand-new car is one of the best ways to save money when you need to upgrade your wheels, but the savings can quickly evaporate if you don’t get the right financing deal on your purchase. Here’s how you can maximize your saving when buying a used car.
It All Starts with Your Credit Score
Just like any other loan, the terms of a used car loan will depend on your credit history. Your score will also make a difference when it comes to how much you can borrow. This is why you want to know what your credit score is before you apply for a loan and star shopping. You can get your score from Equifax or TransUnion.
The scores range from 300 to 900. The higher the score, the better your credit rating. 760 is considered excellent, but the average is between 660 and 724. If you have a low score, you might want to consider taking some steps to increase it before you apply for a used car loan.
Look at More than Just the Monthly Payment
While what you have to pay each month is an important piece of your used car shopping decision, it’s not the only factor you should consider. Some used car dealers try to sell you on a loan by selling the monthly payment, but getting a lower payment might mean paying more for the vehicle over the life of the loan.
A long-term loan may look good each month, but it could also increase your chances of owing more than the vehicle is worth.
How Much Do You Have for a Down Payment?
One of the best ways to decrease your payment and save over time is to make the largest down payment you possible can. A large down payment decreases the amount of money you need to borrow, which means you’re paying interest on less money. A good rule of thumb is to come up with at least 15 percent of the cost of the vehicle, but if you can swing 20 to 25 percent, you’ll be in even better shape.
Warning! Warning! Signs of a Bad Car Loan
After visiting used car lots you finally found that car that you want to buy. You don’t have the best credit, but you can still get a loan. But sometimes a bad car loan can make what seems like an affordable used car unaffordable. Make sure to read the fine print. If you see an extra charges packed into the loan that you didn’t agree to, or the price of the car is not what you agreed to, it may be a sign that someone is trying to get you into a bad car loan.
Another important thing to look out for is a conditional sales agreement. This type of agreement means you are responsible for securing the financing, but it also means the dealer can cancel the sale, even after the deal is finalized.
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