For many of us, a car is one of the biggest expenses in our monthly budget. And with the average cost of a used car now at more than $20,000, the cost of owning a car is more expensive than ever.
While paying for a car with cash and having no monthly payment sounds like a nice idea, it’s simply not a reality for most drivers.
Read on for a closer look at how to pay for a car when you can’t afford to buy with cash.
Get to Know Your Credit Score
If you don’t have enough cash to buy a car, you’re going to have to obtain financing. That means a lender will need to look at your credit score.
Before you begin looking for financing, use one of the many free credit score tools to check your score. If you don’t have much credit history or a very good score, you may want to try to improve your credit before applying.
Do Your Homework
A car loan is a big commitment. Before you commit to paying hundreds of dollars each month, be sure you know exactly what car you want and what the models you’re interested in are worth.
Do as much research as you can before setting foot on a car dealer’s lot.
Keep it Simple
If you’re financing a car for the first time and don’t have a lot of cash or credit history, don’t go all out with your vehicle purchase.
Pick up a more basic vehicle that meets your needs and is well within your budget. You can always upgrade later.
While many car dealerships offer financing options, you can usually find much better rates on your own. Dealers only have access to a handful of lenders. Do your own research and compare as many lenders as you want.
Get pre-approved before going to a dealer for the best terms and skip the hassle of haggling over price and payments.
Making a Downpayment
If you have good credit or a decent trade-in, you can often buy a car with no down payment. As tempting as this might be, it’s almost never a good idea.
Put at least 10 percent to 20 percent down on a car and you’ll have a much lower monthly payment and may even get access to better car finance rates.
Finalizing the Deal
If you’ve never financed a car before, the process can feel very overwhelming and maybe even a little scary.
Just remember that until you sign the final paperwork, you haven’t committed to anything. Be sure you understand everything and don’t commit until you’re completely comfortable with the terms.
How to Pay For a Car
Buying and financing a car doesn’t have to be an intimidating process. Just make sure you understand how to pay for a car and how the financing process works before heading to a dealer.
Check out the rest of our blog for more on buying, selling, and maintaining your vehicle.