Want to purchase a car but paying in cash doesn’t seem like a good idea?
You should consider talking to a car loan provider.
The right car loan will help you preserve your savings as you won’t have to pay thousands of dollars in principal and registration fees and applicable taxes. Financing a car is also a smart move if you want to build up your credit score and establish a good history to enjoy the most favourable lending terms in future.
Now, as tempted as you may be to get a car loan to purchase your favourite vehicle, you must evaluate important factors and plan ahead. Otherwise, the loan will quickly become a liability.
To make things easier for you, we’ve rounded up the top eight things you need to consider before reaching out to a car loan provider.
Things to Do before Talking to a Car Loan Provider
When considering taking a car loan, make sure you follow the tips below.
1. Know Your Budget
Buying a car is a big investment. Before you start exploring different models, you must determine how much you’re willing to spend.
In addition to paying a lump sum at the time of purchase, you’ll have to cover other expenses, such as fuel, insurance premiums, and maintenance. When finalising your budget, you should set an upper limit and decide the amount you can easily spend on the car every month.
2. Decide Whether You Need a New or Second-Hand Car
Next, you should assess your needs and preferences and decide whether you must buy a new car or a used vehicle.
Many people go for the latter when buying their first car and invest in a new model only after they’ve gotten the hang of driving. However, you must keep in mind that although second-hand vehicles are less expensive, they often bring higher maintenance costs to the table.
At the end of the day, it depends on your budget, preferences, and the estimated cost of having a personal car.
3. Find a Suitable Car
Once your budget and model choice is sorted, you can start finding a car that meets your requirements. We recommend listing down the car specifications you can’t compromise on while keeping your budget in mind, of course. These may include automatic gear, safety features, sunroof, heated seats, and surround system. Also, think about your desired colour, engine type, and performance level of the vehicle.
Ideally, the car must fit your taste, budget, and lifestyle.
Considering the number of automobile companies in the market today, you’ll have plenty of options to choose from. You can start shortlisting vehicles based on your list of specifications.
4. Determine the Car’s Resale Value
All smart buyers calculate the resale value of a car before making a purchase. Depending on the engine’s power, fuel efficiency, interior, comfort, and brand value, some vehicles have a higher resale value than others.
Apart from this, car maintenance is an important concern for buyers. It’s best to invest in a vehicle that has multiple service centres within easy reach. You must also check the availability of spare parts.
These considerations will make things easier for you in future if you have to deal with an unprecedented financial crisis or want to invest in an upgraded vehicle.
5. Research, Research, Research
Once you’ve decided which car you want to buy, you must look for the Manufacturer’s Suggested Retail Price of the particular model. This information will help you negotiate smartly with the car dealer and seal the deal at a reasonable price.
Ideally, you should go for a car that takes up less than or up to 5% of your monthly expenses.
6. Get Details about Various Financing Options
You should plan your finances before reaching out to a car loan provider. Buyers who don’t think things through get stuck with hefty monthly loan payments.
Make sure you look into different financing options before making the final decision. Don’t forget to check the interest rates. The higher they are, the longer it’ll take you to pay off the loan.
A good understanding of the current market scenario will help you get the best rates. It’ll also help you negotiate the price and terms confidently.
7. Focus on the Total Amount
Many buyers get lured into a deal with low monthly payments. They fail to realise that they’ll be paying a much higher amount in total.
This is why you must look at the bigger picture and focus on the total cost of the car. Monthly instalments often include hidden charges, such as car preparation, taxes, dealership costs, and delivery fees. Make sure you inquire about these costs before finalising the deal.
It’s also important to read the car loan agreement carefully and ask questions before signing the document.
8. Avoid Purchasing Extended Warranty and Add-Ons
Often, buyers give in to purchasing an extended warranty to enjoy higher coverage without realising that it usually offers little to no benefits. These warranties only add to your costs and don’t even cover mechanical issues.
If you’re buying a new car, you should only care about the manufacturer’s warranty, which covers most of the vehicle damage costs. On the other hand, if you’re opting for a second-hand vehicle, you must check if the manufacturer’s warranty is still active. Otherwise, you’ll have to save money to take care of the repair and maintenance of your car in the long run.
As far as the add-ons are concerned, they also significantly increase the vehicle’s cost. The majority of the high-price add-ons offer no real utility. In fact, they may cause your car’s battery to drain faster, compromising its overall functionality.
Especially if you’re buying a used vehicle, spending money on add-ons isn’t a great idea considering that you already have to pay a monthly EMI.
Sorting out your finances is a must before reaching out to a car loan provider and applying for a loan. Instead of deciding in haste, you should evaluate your options and find the best EMI plan to ensure you can repay the amount without much hassle.
Apart from this, take your time when selecting the right car. See it as an investment in your lifestyle. The ideal vehicle will be durable and budget-friendly. It’ll suit your taste and attract minimal maintenance costs.
Best of luck!