What You Should Know About New Car Loans

You’ve decided you want to buy a car. You want a new car, but you’re not sure of the financing of a new car. You’ll want to look into new car loans to purchase your car, truck or SUV. The options for a new car loan can feel pretty endless, but the truth is that lenders prefer to finance a new vehicle and you’ll probably find more financing options with the purchase of your new car.

Most financial institutions offer lower rates for a new car loan, so check with your bank or credit union first to see if they can do something for you. You’ll definitely want to shop around for a new car loan, though, because there are so many options with this type of financing.

? Know where you’re shopping. Even if you’re shopping for a new car loan online, you’ll want to make sure you’re working with a reputable lender who won’t overcharge you in interest or fees.

? Get pre-approved if you can, but know the price range of the car, truck or SUV you’re shopping for. This will give you much more purchasing power and room to negotiate. Your financial institution will either authorize a certain high amount for you to borrow or some of them will give you a blank check to present for payment at time of purchase. The full purchase amount will be the amount of your loan.

? Have some money down or a trade in if you can. A decent trade or down payment can dramatically reduce the amount you owe and can often help to lower your interest rates.

? If you’re not sure what kind of financing you’re looking for, try the dealership. If you know where you want to buy your vehicle, the dealership might have special financing offers for you if you finance through them. Ford has it’s own financing, as well as GMAC and Honda. Most major car manufacturers have financing affiliated with them directly. Sometimes, these lenders can authorize things like cash back options or zero percent interest. If you’re a credit risk, however, this may not be an option for you.

? Know your credit. Know how much you want to finance and how much you want your monthly payments to be. Try not to stretch the term of your loan past 60 months, or five years, as your vehicle may decrease in value too much by the time you’ve paid off the loan. Don’t try to finance $30,000 for 60 months and expect to pay less than $500/monthy. That’s with no interest.

Most importantly, don’t overextend yourself and your budget. Even if your lender approves your request for a huge loan, know that you don’t have to use it. Don’t feel like you have to spend the entire amount of what the financial institution is offering. Always shop for deals and cash back offers if you can. Compare the amount of interest you’ll potentially be paying vs. your cash back amount. If you won’t be paying that much interest, consider taking the cash back instead and giving your new car loan a boost by paying down the principal immediately.

However you choose to work the options, new car loans typically offer lower interest rates and can be found at almost every major reputable lender.