How to Secure the Best Deal When Buying a New Car

Buying a new car is an exciting venture, but it requires thorough research and preparation to ensure you get the best deal. Whether you have a specific make and model in mind or are open to various options, focusing on the financial aspects is crucial. Here are some steps to take before heading to the dealership and while you’re there to secure the car you want without breaking your budget.

Check Your Credit Reports and Scores

If you plan to finance your new car, your credit scores will significantly impact your monthly payments and the overall cost of your loan. Start by checking your FICO® Score to understand where you stand. A high credit score can help you secure favorable loan terms, while a lower score might mean it’s better to wait and improve your credit before making a purchase.

Take Steps to Improve Your Credit

Improving your credit can take time, but the potential savings are worth the effort. Here are some steps to take before buying a new car:

• Catch up on any late payments in your credit file as quickly as possible.
• Reduce high credit card balances to lower your credit utilization rate.
• Dispute any incorrect information on your credit report with the appropriate credit reporting agencies.

Know Your Budget

While getting a new car is exciting, it’s essential to ensure the monthly payment fits within your budget. Consider your other financial obligations and goals, as well as your discretionary spending. Also, evaluate your savings to determine if you can afford a down payment and how much. A down payment can reduce the amount you need to borrow and your monthly payment, but don’t deplete your savings entirely, as this could leave you vulnerable in an emergency.

Trading in your current car can also increase your down payment amount, though selling it to a private buyer might yield a higher sales price than selling it to a dealership. Once you know how much you can spend each month on a car loan, you’ll have a better idea of the sales price you can afford.

Shop Around for Auto Loans

While some car dealers can arrange financing for you, you might get a better deal by securing an auto loan on your own. Start the process before visiting the dealership by getting preapproved for a loan from banks, credit unions, or online lenders. This preapproval will be based on factors like your credit history, income, expenses, and the vehicle you’re looking to buy.

Comparing offers from multiple auto lenders can help you secure the lowest interest rate you qualify for, saving you time and money. When a dealer arranges financing, they might offer a higher rate to compensate for handling the process. By bringing your own financing terms, you can negotiate a lower interest rate or buy the car with a rate the dealer can’t beat.

Remember to shop around quickly, as applying for multiple car loans within a 14-day period typically counts as one inquiry when calculating your credit scores.

Negotiate and Make a Deal

Negotiating is crucial to ensure you get the best price for your new car. Research the car’s value using resources like Kelley Blue Book or NADA and compare prices at several local dealerships. If you find a lower price elsewhere, use that information to negotiate with your preferred dealer.

Consider timing your purchase to coincide with the end of the month, quarter, or year, when salespeople might be more willing to cut the sales price to meet their quotas.

Look at the Total Loan Cost

Dealers often focus on monthly payments and might encourage you to opt for a longer repayment term to make the payment more affordable. However, it’s essential to consider the total cost of the loan to avoid overpaying for the car.

For example, a $25,000 car with a 5% interest rate over four years results in a $576 monthly payment and $2,635 in total interest. A six-year term at 6% interest lowers the monthly payment to $414 but increases total interest to $4,831. Always ask the dealer to explain loan options in terms of total cost, not just the monthly payment.

Understand Potential Credit Impacts

A car loan can positively or negatively affect your credit, depending on how you manage the monthly payments. Paying on time every month can boost your credit scores, while missing a payment by 30 days or more can significantly harm your scores. To ensure your auto loan helps your credit, consider setting up automatic payments.

Make Sure Buying a New Car Is the Right Choice

The best time to buy a new car is when you need one. However, if you don’t need a new car, it might be better to wait, especially if your credit needs improvement or you want to save more for a down payment. Avoid waiting until an emergency to buy a car, as this can reduce your negotiating power.

Give yourself enough time to research and negotiate your options to get the best deal. Prepare your credit for a new auto loan as early as possible, and monitor your credit for free through Experian to stay informed about your credit status and steps to improve your score.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. Our team is here to help you navigate the financial aspects of your car purchase and ensure you get the best deal possible.