Have you decided to take an auto loan for first-time buyers? What car can you afford? What does the cost of a car depend on? At what stage of purchasing a vehicle should you think about a car loan? Is car leasing more profitable in the current realities?
When buying a car on credit, until recently, borrowers were divided into two categories – those who need to get a loan quickly, without delay, regardless of the conditions, and those who prefer to wait but choose a program that suits them. The development of banking systems and decision-making technologies have combined these client categories into one.
Today, every eighth car is bought on credit, including every third loan is provided as part of the purchase of a new car. In this regard, there are several points that you should pay attention to when taking an auto loan. At the same time, do not forget that the car loan market, like any other market, requires knowledge and does not tolerate fuss. Below you can find some auto loan tips.
First of all, you should study the loan rates offered by lenders. To do this, you can use special rate aggregate websites or go to the sites of key banking institutions that offer car loans (there are not so many of them). It is recommended to do this before going to a car dealership in order to generally understand the “price issue” when making a purchase on credit, and also to be able to use the most advantageous offer if a limited number of credit programs are offered in the salon. It is important to carefully read the current government programs to support the car market. Their use will significantly save money when buying a car.
You should always be interested in special programs from car manufacturers, joint promotions of banks and car dealers and/or manufacturers, as well as seasonal discounts. Experienced car enthusiasts know that buying a car “for a special offer” can be very profitable and cover all associated costs with interest.
Insurance can be different
You should bear in mind that many lending programs imply the mandatory purchase of comprehensive insurance. It also makes sense to consider the offers of various insurance companies. The cost of comprehensive insurance for the same make and model of the car may differ significantly. Another way to reduce the payment for car insurance is the ability to purchase a policy, for example, only for the risks of “theft and damage”. At the same time, the client can take all insurance services on credit.
Choose the amount of your down payment wisely
It is worth paying close attention to the amount of the initial payment: the temptation to pay the minimum installment (15-20%) is very great, even if you have funds for a more substantial initial payment. However, as a rule, the larger the down payment, the more chances you have for loan approval, fewer documents and a more favorable interest rate.
Choose the optimal loan term and amount
Given the fact that you can repay the loan ahead of schedule in full or in part without any penalties at any time, you’d better get a loan for a longer period in case you have any unforeseen financial problems in the future. And if everything goes according to plan or better, you can repay the debt ahead of schedule.
Speaking about the loan amount available to the borrower, you need to understand that the bank, in addition to direct risk factors, will focus on the borrower’s debt burden and income. On average, the monthly financial burden for all types of obligations should not exceed 50% of the total income.
Is there an alternative?
In general, it is worth noting that the attitude towards the car around the world in recent years has been changing towards the rationalization of its use. The rise in the cost of cars, the development of car-sharing, car leasing and subscription cars, the transport situation in megacities and the availability of taxis – all this makes us think about the economic feasibility of owning a car. But these facts are more likely to refer to large US cities. In Woburn MA, the car is still the main means of transportation.
As for the choice between a car loan and car leasing, each product has its own specifics, and each client has his/her own needs. So, car leasing is interesting primarily for individual entrepreneurs and clients who buy a car on the company’s balance sheet but can also use it as a personal vehicle.
For clients who buy a car for personal use, a simple auto loan is a more interesting offer since the car is immediately owned by the client, the bank has lower loan requirements and it is easier to find a loan for your conditions. The main thing is to do it wisely.