\nBefore you do anything else, calculate your budget to see how much you can really afford to spend on a car. Go into the dealer with big dreams and no idea what kind of budget you’re working with and you’ll wind up driving a prince’s chariot on a pauper’s salary. Consumer Reports recommended paying no more than 36 percent of your gross income on debts<\/a>. In other words, find out what 36 percent of your annual gross income is. Add up all of your monthly debts – insurance, rent, bills, food and credit cards – for the year and subtract that from your 36 percent. What you have left\u00a0is an approximation of\u00a0what you can potentially spend on\u00a0car payments\u00a0annually. Don’t forget to look into additional costs associated with a new vehicle, like registration fees, changes in insurance and any taxes you might have to pay on it.<\/li>\n
\nThis cannot be stressed enough, so we’ll say it again – make a down payment. The more money you can drop on a car up front, the better. A solid down payment will lower your monthly payments, lower the interest rate and leave you owing less overall. Obviously you don’t want to break the bank\u00a0trying to make a down payment, but if you can hold off as long as possible and save up a solid cash pile, do it. You should try to make your down payment between 15 and 20 percent of the total cost of the vehicle, according to Consumer Reports.<\/li>\n
“Get your credit score before doing anything else.”<\/i><\/p>\n<\/div>\n
Know your credit score<\/strong> \u00a0<\/strong><\/li>\n “Compare interest rates with as many lenders as possible.”<\/i><\/p>\n<\/div>\n Shop around<\/strong>
\nGet your credit score before you even think about applying for a loan. Your credit score determines your interest rate, and if you leave it up to the lender to determine your credit rating, you might be getting the short end of the stick. Also, if you find out early on that you have poor\u00a0credit score,\u00a0you can take the time to figure out how best to bring your score up before you start looking for the perfect used car.<\/li>\n
\nContrary to popular belief, your credit score isn’t everything – and how “bad” or “good” it is may depend on the eye of the beholder. Bankrate reported that many lenders may look closer at your credit history<\/a> than the actual score. While a low score might rule you out for a house loan, the same score might work just fine for an auto loan if your history indicates that you’re building decent credit.<\/li>\n
\nRather than negotiating the monthly payment, insist on lowering the overall purchasing price instead. It may mean you have to pay a little more per month, depending on how you negotiate it,\u00a0but the lower the purchasing price, the less you owe altogether. You should also avoid vehicles with upgrades and add-ons\u00a0that have driven up the value,\u00a0especially those that you can afford to purchase later on, as they will only increase the loan amount.<\/p>\n![\"Black](\"http:\/\/pictures.brafton.com\/x_0_0_0_14105882_800.jpg\")
Rather than negotiating the monthly payment, insist on lowering the overall purchasing price instead.<\/figure>\n<\/div>\n
\nAccording to Consumer Reports, longer loans cost more than shorter ones<\/a>. The catch is that longer loans usually mean lower monthly payments, but that extends the total cost of the interest. You’ll pay more in interest over five years than in three. Also, longer loans usually carry higher interest rates anyway, so that will increase the total amount you’re spending as well. A shorter loan may mean you’re paying a little more per month, but if you can afford the higher payments, the interest rate will be lower and you’ll be paying less in the long run -you’ll also have the satisfaction of paying off the loan in a shorter amount of time.<\/li>\n
\n“Upside down,” in loan terms, occurs when your vehicle is worth less than you owe on it. You need to try and ensure that this does not happen to you. If you go to trade in your car before you’ve paid the loan off, and it’s worth less than what you owe, you end up with negative equity. If something terrible happens and your car is totaled, but the value is less than what you owe, the insurance payout will only cover the value of the vehicle and you’ll be stuck paying off a car\u00a0you \u00a0no longer have\u00a0while attempting to\u00a0buy a replacement. One of the ways you can avoid this is\u00a0to make sure you have a down payment when you purchase a used car\u00a0– it will help add equity to the car before you even start paying the loan, according to Consumer Reports. This is also another good reason to negotiate a shorter loan term –\u00a0your monthly payments will accrue more equity in a shorter time than if they are spread out over a longer loan period.<\/li>\n
\nDon’t just go into this blind and settle for the first deal that sounds good. Compare interest rates with as many banks, credit unions and other lenders as possible to find the best rate for your used car loan. This includes online lenders – most of which have calculators on their websites<\/a> that will help you figure out what you’re really getting into, according to\u00a0DMV.org. Remember, most rates are competitive, so the more information you have about rates, the more you can negotiate with lenders.\u00a0Dealerships, such as New Jersey State\u00a0Auto Auction, also have on-site financing available, and often at a rate that competes with local banks. Bankrate recommended focusing on lenders that specifically deal in auto loans, as they will interpret your application differently than a lender that deals in a broad range of financing.<\/p>\n