So you have decided that it is time to get yourself a new set of wheels, or perhaps your first ever? Well, buying a new car would be the best option. However, with a tight budget, buying a used automobile can save you thousands of dollars. There is a wide variety of quality used cars in the market that would relieve you the financial strain of buying a new one.
Financing your used ride may not be as simple as it looks; some dealers in used cars may also employ some tactics that will make it difficult for you to get out of debt. You will, therefore, need to watch your wallet because it may be more costly than acquiring a loan on a new car.
The value of a new car plummets immediately you drive it off the loot. Used cars, however, do not undergo the initial depreciation hit because the original owner will have already suffered the loss of value. Based on this, therefore, the used car buyer acquires the vehicle at a revalued price.
The funding process for a used car might be similar to getting a new car loan except that the costs might be different. Interests on used car loans may be higher because it is riskier to lend on a used car. Therefore, it is important to figure out the much you can afford before visiting the lenders that you have related with such as banks or credit unions.
As much as most people depend on banks for financing, this may not always be possible since banks sometimes reject such applications based on your credit standing. When this happens, the last option of financing is a car dealer. As much as they are generous with their credit facilities, they will most likely come with exorbitant rates or long terms. Financing is profitable for car dealers, and finding loans that give them most money is their ultimate priority. In most cases, these dealers will mark up the deals. For instance, a lender might finance the dealer at 6% interest, and the dealer would then finance you at 9%. In most cases, the seller will not disclose the markup.
A better plan is to take time and ensure there are no mistakes on your credit report before you buy the car. However, it is always important o stay updated on your credit score. You can access your credit score at no cost from various online sites. The factors that influence your credit score include:
• Your current financial obligations versus to your income
• Your adherence to paying monthly bills
• Any defaulted previous obligations
To protect your wallet, ensure you avoid the buy here/pay here dealers. Such dealers often charge buyers with interest rates that are higher than market rates on already overpriced vehicles. In fact, you may be surprised that it is possible to buy a car for the same value as the down payment they charge! It is, therefore advisable to act with due diligence in order to get best interest rates for car loans.
With the unethical behavior of car dealers, it is important that you play smart. Avoid deals that might make you incur more expenses in the name of getting a ride. Good luck in your search.