With the rapid increase in gas prices, buying a car can add to existing stress.
Knowing the details of car financing can help you save thousands of dollars.
Former car salesman turned finance expert David Weliver has shared his tips and tricks for helping others save money on their new rides on his Money Under 30 website.
Try to get a short repayment term
The dealership will always try to encourage you to pay less each month, but that’s so they can extend the term of your car loan and charge you more interest.
Banks also often charge higher interest rates for longer loans, Weliver says.
So even if it looks like you’re getting a lot, you’ll end up owing a lot more to the bank.
Higher payments over a shorter period will mean you end up paying much less in the long run.
And the sooner you pay off your car, the sooner you’ll own it.
This means that in the worst case scenario, if your car is damaged beyond repair, you don’t have to pay for a vehicle that is already scrap.
Weliver also suggests setting up automatic payments on your loan, so you don’t miss a payment and get stung by fees.
Understanding Your Credit Score
A credit score is an essential factor when it comes to car financing.
Car dealerships sometimes advertise great interest rates for their automobiles, but often fail to include one important factor: the amazing rates are only available to those with exceptional credit ratings.
Dealerships are still likely to give you a car loan despite having bad credit, but you’ll often have to pay much higher interest and lose massively in the long run.
Weliver says if your credit score is on the lower end of the spectrum, it’s important to research many dealerships and find the best rate offered.
If your credit score is excellent, it’s more likely that you’re already receiving the best financing rates directly from the dealership.
A high credit score is sought after on multiple platforms, and the dealers themselves would obviously want to rip off your high credit support.
But if your credit rating is bad, dealers are more likely to take advantage of you.
In this case, it is important to do your research and obtain financing quotes before entering the dealership.
Another way to drastically reduce your interest payments is to minimize the amount you actually borrow.
Weliver recommends putting at least 20% down on your new car.
He says that if putting 20% down on a car is heavy, it means you probably can’t afford the monthly fees or interest in the first place.
Use cash for fees
The dealership won’t let you walk away with just the price of the car.
Buying a car comes with additional costs, including sales tax, dealer fees, extended warranties, any optional extras you select, and more.
To minimize scams, Weliver suggests asking for an itemized bill and paying in cash.
By following these two steps, the dealership will have a harder time hiding all unnecessary charges from you while saving you from paying additional charges that you don’t actually need or want.
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