When you enter your local dealership, you might feel as if though you are entering a place of unlimited possibilities. With so many brand new cars and so many new modern features, it can be hard to decide which new car is best for you.
However, many buyers lose their heads when it comes to purchasing a new car and spend more than they can afford. If you are looking to stay within reason when purchasing your next new car, check out our tips below.
Make a Plan
Unless you are extremely wealthy and have a massive pile of cash, you may want to put some thought into your next vehicle purchase. Being an informed consumer means knowing what you are able to buy and be able to repay with monthly payments. If you answer some questions below, you are much less likely to regret buying that new car.
- Do you drive a lot of miles to work and home?
- Do you have a large family and are in need of extra space and seats?
- Are you making frequent long distance trips?
After you answer those questions, take a moment to consider the various perks and features that are most important to you. These can include things such as gas mileage, technology, extra seats, cargo space, and more. Be sure to look up vehicles online that fit your needs.
When deciding how much car you can afford, remember to include the cost of insurance and interest that can be added onto your monthly payments. A good rule of thumb to consider is to not spend more than 20% of your pre-tax income on your auto loan and insurance payments.
If you are bringing home $3,000 per month pre-tax, you should be able to afford a $600 auto loan and insurance payment per month.
You can use various online calculators to figure out how much car you can afford in terms of the payments you can make.
All dealers and lender will be certain to check your credit score like a hawk. By analyzing your credit score, lenders can see how much of a risk you could possibly pose on defaulting on your auto loan. Having a less than ideal credit score can give you a high-interest rate and thus higher payments.
Before you drive off in your new car, be sure to get a copy of your credit report and credit scores from all 3 major bureaus. Check to ensure that no errors or unknown transactions are present on your reports, as they can lead to an unfavorable interest rate.
If you are looking for an auto loan with less than ideal credit, CrediReady can help you! Our nationwide network of trusted dealers and lenders work with buyers in all credit situations. Take a moment to fill out our free no-obligation form to get started and see how much you can save today!