Average new car prices hit a record high in mid-2022, clocking in at $48,043, over $5,000 more expensive than last year’s average, according to Kelly Blue Book. Although unprecedented, this has been an anticipated development due to the current state of the economy. Given rates like these, just about everyone is choosing to finance their car. But whether the economy is up or down, there are a few principles you can follow to ensure that you can always finance the purchase of a state of the art vehicle. Read on to find out what they are.
Assess Your Resources
You might think this goes without saying, but far too many car lovers get ahead of themselves and go into a car purchase while still paying for their current one, and with an abysmal credit score to boot. You can’t very well purchase a new car with no financing options. First, figure out how much money you can direct towards this purchase by considering all outstanding debts and your credit score. Aim for a debt load that’s under 40 percent of your current income and a credit score of over 800. Otherwise, things can very easily run away from you, and you may be buried by accumulated late fees and high interest rates.
Determining your financial health is an essential first step to any large transaction. It will inform you of the next steps you can take to drive that car you’re dreaming of out of the dealership and into your driveway. Showing you what cards you can play, as it were. For example, you may want to bide your time to raise your credit score and settle a few debts, or if that’s not doable, figure out the ideal car payment rate you should negotiate to stay in the black.
Explore Your Financing Options
Once you have a clear picture of your financial health, you can take stock of all the options you can take to finance your new purchase. It’s a prudent move to get preapproved for a loan so you can verify that your assessment was correct. You’ll also be able to have a cold hard figure in front of you in the form of the amount and rate banks are willing to give you given your credit score.
In terms of financing your purchase, one option that many frequent car buyers choose is refinancing their car loan, similar to how home buyers refinance their homes. This lowers your monthly rate as well as the interest rate. Alternatively, taking out a line of credit might be more effective if you can get better rates for it. Ultimately, the best financing method will depend on your specific financial situation. Many automotive enthusiasts also join an auto buying program to get the latest news on deals and promos, as well as financing tips. Some also advise auto fans on how to save as much as they can on their purchases by dropping certain optionals that don’t really add that much value.
Look into Ways to Save
Cars are an expensive hobby, and so if you’re pressed when it comes to financing your next auto purchase, it always helps to find ways to save. One of the primary ways you can do so is to buy used vehicles. Although you may be eyeing the latest model, there are still bound to be a few units that have been used for a few months and put up for sale for whatever reason. Because cars depreciate fast, these ought to have a decent amount shaved off the sticker price.
There’s also the matter of trim levels. Higher trim levels can have outrageously higher markups than lower ones, for features that you can cobble together a competent imitation of using aftermarket gadgets. Addons are another thing that dealerships can rip you off with. Similar to built-in trim level features, these widgets are incredibly overpriced. It’s also wise to be wary of longer payment periods. You may be enticed by the lower monthly rate, but you might end up paying much more in interest in the long run.
Buying a vehicle is probably the most expensive single purchase a person can make next to buying a home. But with careful planning and a good amount of financial wisdom, you can get away with buying the latest cars as soon as they come out.