There’s no denying how stressful the car-buying process can be, and it can be made a whole lot more tumultuous when you’ve never had to endure this ordeal. Well, we’re here to help. Below, we’ve explored several tips that you should keep in mind as you’re shopping for a vehicle (and the accompanying car loan). While we’re sure you trust our judgment, we’ve also relied on some experts for literal guidance, thus adding a bit of credence to what we’re saying. Continue reading below for some tips and hints, and you’ll be better prepared to start shopping around for bad credit car loans…
Understand Your Budget
Before you commit to a purchase (or, perhaps, before you even initiate the car-buying process), it’s absolutely essential that you understand the limitations of your budget. Exceeding your budget could have some serious, negative financial ramifications down the road. If you’re already struggling with a poor credit score, then you could find that your standing is put into even more disarray by pursuing a vehicle that you can’t afford.
Of course, it’s not possible to anticipate this issue if you don’t have a firm understanding of your budget. Therefore, make sure you sit down and figure out the appropriate amount of money you can logically spend each month on a car payment. While this might slightly limit your options, we can guarantee you’ll appreciate it in the long-run.
Expert Says: “Get a clear idea of how much you can spend (down payment and monthly payments) before you start looking at cars,” explain Justin Pritchard of TheBalance.com. “If you fall in love with a vehicle before you know whether or not it’s in your budget, some salespeople can make it appear as if the car is affordable with fancy math and long-term loans.”
Understand Any Fees
This might be relatively obvious, but if you’re about to purchase a vehicle, you shouldn’t expect to only spend money on the literal car. Predictably, there are insurance payments, and you might owe money for interest rates on any applicable loans. However, dealerships or car brands might accompany some type of fee with the purchase of their vehicle, and this “small charge” could actually put a dent in your budget. Therefore, it’s essential that you understand what you’re getting into ahead of time.
Expert Says: “Before you select a car loan, it’s crucial to find out whether any penalties or fees are involved,” said Holly D. Johnson of Lending Tree. “For example, some car loans exact a prepayment penalty if you pay your car off before the term of your loan ends. If you choose a loan with this stipulation, you’ll need to pay this fee if you choose to pay your car off faster than loan terms dictate.”
If you’re after the best-possible deal as you’re shopping for a new or used car, it’s in your best interest to shop around at multiple dealerships or sellers. By failing to do this, there’s a chance that you might be missing out on a better deal elsewhere. Plus, shopping around won’t just guarantee that you’ll be securing the best possible deal; rather, you can get a better gauge of what you can afford on your particular budget, and you might find that you’d rather opt for a used vehicle instead of a new vehicle.
Expert Says: “The first is that loan shopping gives you the chance to compare the various interest rates on offer,” said Consumer Reports. “Those interest rates can vary a lot from one lender to another, regardless of your credit standing. All of the auto loans granted by Bank A may be more expensive than the auto loans granted by Bank B. The wider you cast your net, the better chance you have of landing a bargain.
“Second, getting pre-approved buys peace of mind. You may or may not have found the best deal possible, but at least you know you will have enough money to cover the purchase, and you know the interest rate and term, in years and months, of the auto loan.”
Be Aware of Tactics
Many dealerships are reputable and trustworthy. However, you should still expect the salesman to pursue the best deal for themselves. Therefore, you should anticipate that they’re going to rely on a number of negotiating tactics as they try to get every last penny out of you. Instead of being threatened or offended, you should spend some time researching these various strategies. That way, when they begin to hit you with their game plan, you’ll already be fully prepared to negotiate back.
Expert Says: ““Just say ‘no’” is good advice,” Phil Reed of Edmunds told Russ Heaps of BankRate.com. “They are really there to make extra profit for the dealership by increasing interest rates and selling extended warranties and add-ons such as fabric protection and paint sealant.
“Even if you want an extended warranty or credit life insurance, these items are available at a lower cost from sources outside the dealership. Folding them into your car loan and paying interest on them for the life of the loan can add hundreds of dollars to the amount you pay. Further, question every fee you don’t understand.
“Dealers can write other fees into the contract and give them official-sounding names. These fees are another attempt to take profit on the back end of the deal when the buyer’s guard is down.”