Used Cars Financing: Loans, Deposits & Credit History
Used Car Finance
Lots of people spend a great deal of time on researching their used car. They will do a lot, buying car magazines, watching car programmes, reading the car section of newspapers, and going on car websites. By the time they come to actually go and buy the used car, they will know the make they want and the model that they want – they will be able probably to tell you about most of the makes and models in their price range. They think this makes them a formidable negotiator when buying used cars.
Yet as Oscar Wilde said: “Nowadays people know the price of everything and the value of nothing” and so knowing the prices of used cars is all very well, but if you don't also know a lot about financing, then you are so much less likely to get a good value deal on the car. If dealers realise that you know a great deal about the value of cars but not much about the value of financing they will lull you into a false sense of security by giving you what looks like a fantastic deal on the car but then stuffing you like a turkey on the financing.
There are probably as many options out there for financing as there are for cars, and as many ways of finding financing as well. In order to help you avoid the surprises that can be so costly, here are some useful steps.
Step 1 of the process is to work out how much you wish to borrow. Or in other words, how much you can afford in terms of deposit (money up front) and loan. You need to know what the monthly payments would be should you borrow a specified amount of money.
Step 2 – It's not just about the money its also about the length of your loan. A longer loan will lower your monthly payments but it will raise your final financing costs.
Step 3 – Don't overextend yourself financially and make sure that the cars depreciation doesn't mean you are in negative equity on it.
Step 4 – Remember extra expenses – owning a vehicle involves gas, insurance and maintenance costs. Include these on top of your monthly payment.
Step 5 – Shop around as much as possible. You should check out a lot of dealers and look at many financial institutions to try and get the best deal. If your financing is already arranged then dealers view you as a “cash buyer” which is very helpful for you.
Step 6 – get your credit record ready and understand that your credit history will be looked at to determine your interest rates – so make sure omissions and mistakes are not there.
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