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Checklist for Auto Financing
By plrprousers | March 21, 2010
Do not Bite off More than You Can Afford
When choosing how much you can afford for a car payment, take a realistic inventory of your expenses. Write down everything you purchase for 7 days or two, that way you’ll be able to produce an honest amount you can spend on your new car. Your credit score will be best if your expenses are simply 30% of your revenue before taxes. You’re better off choosing a car you can comfortably afford over one you would have to stretch to make the payments on and saving money in case of an emergency. One missed payment can hurt your credit and force you into a higher interest loan further down the line. As a matter of fact, FICO just recently released details about how your behavior has a bearing on your credit rating.
Do not Go to the Dealership Before Knowing Your Credit Score
If you have no idea what your FICO (credit) score is, do not even step foot on the lot of a car dealer. There is no sense in spending all day looking at and test-driving cars only to go through the finance manager’s workplace and learn that your credit rating isn’t good enough to qualify for financing. Plus, knowing what your credit score is early might help you get financing through a private lender, which might get you an improved interest than the dealer can give you. Many customers are now trying online for financing before ever heading to the dealership. This gives them the freedom to negotiate with the dealer as a cash buyer; and in many cases, helps with getting an improved deal.
Do not Forget About the Expense of Auto Insurance
Before you take a car, get insurance quotes. For young buyers or people with less than perfect driving records, insurance can cost as much as or more than your car payment. Take into account that in general, the more you spend on your car, the higher your insurance bill will be, so just as you can produce the monthly payment on your dream car doesn’t mean you can really afford it. Many items effect your insurance rates including your driving record, the sort of vehicle you are obtaining and the engine type to name a few.
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