Auto Loan Advice for First-Time Car Buyers

Auto loan advice for first time car buyers is important. Most first-time car buyers are young and lack experience. It is important to start out on the right foot and make a wise decision. Today's auto loan market offers many choices, that can be confusing to even the most experienced buyers. Here is some advice that can be beneficial to all, but especially to first-time buyers.

Research Loans

With so many choices in market place, you will need to shop for loans to determine where to find the best deals. Research all of the various options on the internet. Your choices include traditional large banks, small banks, credit unions and Internet banks. However, be careful with Internet banks. Deal only with institutions that are well recognized and have outstanding reputations. If you are doing business with a large international well-known company you should be fine. Look for the best interest rates and terms.

Down Payment

First time buyers should consider making a substantial down payment. This requires some delayed gratification. It may require you to save longer. But the delay could be worth it. The larger down payment will allow you to qualify for the best rates and will make your payments more affordable and save a substantial amount of money in interest payments over the life of the loan.

Go With The Shorter Term

As with a larger down payment, the shorter-term loans will save you money. Evaluating only monthly payments can be shortsighted. Calculate how much interest you will pay over the life of the loan. This comparison should steer you to the shorter-term loans. Typically these loans will also carry a lower interest rate which will generate additional savings. Keep in mind that  if you have to finance over longer term to meet your budget, you cannot afford the car. Also, remember that most cars depreciate in value substantially during the first few years. A longer-term loan will mean you could owe more on your car than it's worth in just a few years.

Get Pre-Approved

Determine your budget for your auto purchase. Remember to include the cost of ownership including insurance. After you made this determination, approach the lender you have selected for a pre-approval. Be sure to come up with a budget before you approach the lender. If your request is too much for you to handle, your loan will be denied. When you have an approval, you can shop with confidence. A benefit of having an approval in hand is that it increases your bargaining power as you negotiate on the price of the car. You should also avoid the temptation to make an ill-advised financing decision at the dealership. Dealership financing often is not competitive. Many consumers are attracted by the convenience and make a fast decision. Many often fail to realize they are paying a price for the convenience of dealer financing.

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