Planning to purchase a used car? But don’t have the penny to pay for it? Don’t worry! This article will share some secret tips with you. You can now finance your dream used car!
If you’re one of the buyers who can’t fully pay for a car purchase in cash, then you’ll be likely to go for a used car financing. If you acquire this type of loan, you’ll be able to buy the car in a much affordable monthly payment compared to a lump sum that sometimes it’s too much for your pocket to handle.
It is a given fact that in every financing services, interest will make the purchase more expensive compared to a lump sum, but a finance service enables you to pay for your purchase and at the same time, it can keep up with your other bills.
So if you’re interested in this type of financing services especially to finance your used car search, then below are some important things you need to do:
Calculate the Monthly Payment
When your budget and finances are in sync, you may now be able to compute your estimated monthly car payment. Loan payments are not the only factor you need to consider in this process, generally speaking, your monthly used car payment should not exceed at least one-third of your net monthly income.
Below are some details to expect when financing a used car:
- Interest – it is one of the most important elements of a used car loan. Interest rate is the total cost borrowing of the loan. You must take note that zero-interest offer is an interesting offer to consider, but it’s not always the best option to choose from. Usually, a used car loan with an interest rate and a rebate would be a better option.
- Down Payment – remember: the bigger the down payment is, the lower the amount you need to borrow. Paying a large amount of down payment is a good thing, especially if you have a bad credit history, it’ll lower your monthly payment expenses and will also lower your interest rate.
- Loan Terms – some used car loan can be stretch up to 96 months or 8 years. Generally speaking, it is better to stay within a 5-year loan term, because any loan beyond this year will only mean that you’ll be paying more than the actual price of your chosen used car.
- Other Fees and Charges – it is common that a lender or a financing company will charge you additional fees such as transaction fees, opening the account, fees for closing, and etc. Some lenders or financing companies will charge you for a prepayment penalty fee. Simply ask the lender whether these additional charges are present in your monthly installment or if it needs to pay separately.
Choosing the Right Lender for Used Car Financing
If you visit any car dealership before banks, usually, the car dealership will offer auto financing with their affiliates. For the convenience, you might grab their offers, because they will all handle all the paperwork needed so your loan can be approved, but sometimes, they have a bigger interest rate. Well, it’s up to you, actually, it’ll always be your choice, you can search for other lenders at your convenience, or the car dealer will handle everything at your own pace.