6 smart steps to take before buying your next car.
It's hard to resist that new car smell, but you'll love your new ride even more if you take these six important steps first. Why? Because knowing that you stayed within your budget and made a smart purchase will make every ride in your new car even sweeter.
Check your credit.
Your credit score plays a big role in your auto loan rate. The higher your score, the lower your rate could be, which means big savings for you. Check out your credit score before you start shopping for a new vehicle. If your score isn't where you want it to be, visit AnnualCreditReport.com1 look over your free annual copy of your credit report to see if there are errors or areas for improvement.
Have a down payment.
It's a good idea to put some money down on your car to build equity. The more you put down, the bigger piece of ownership you have in the vehicle. A large down payment could also reduce your monthly loan payment because you won't have to borrow as much.
There's no set amount for what you should put as a down payment on a vehicle, but the general rule of thumb is to shoot for twenty percent of the purchase price2. If you plan to put less than that (or even nothing) down, you might want to purchase GAP insurance. GAP could protect you from a potential financial loss if your vehicle is stolen or in an accident. This insurance will fill in the 'gap' between what you owe and what your insurance company pays out.
Get pre-approved.
In the excitement to start shopping, many first-time car buyers skip this step (or don't even know about it). Getting pre-approved for an auto loan could give you more negotiating power. This step shows the dealership or private seller that you're serious about buying and you have the financing to prove it.
Another nice perk of getting pre-approved is that it can help you stay on budget. If you're pre-approved for $20,000, it's easier to stay away from the $60,000 luxury SUV because you already know it's not in the budget.
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Budget for extra costs.
Taxes, title fees, and registration fees can easily add a few hundred dollars to the final purchase price of your vehicle. Don't forget about the added cost of buying new or transferring old license plates. Budget the extra costs of buying a car before you start shopping to get a more realistic idea of your final purchase price.
Do your research.
Figure out what you want in a car before you go shopping so you're not overwhelmed by choices when you get to the dealership. Have a few styles picked out and decide what features are deal breakers on your list of needs. Then read reviews and talk to others who own the type of car you're considering.
As a Lake Trust member, did you know that you can shop from home with our new online car shopping tool1? Search inventory at local dealers and compare vehicles in one easy spot.
Maintenance and insurance.
Besides the purchase price, don't forget about the additional costs of owning a car after you drive off the lot. Get a few auto insurance quotes on makes and models of cars you're considering. Also, research the average maintenance costs of each perspective vehicle. Luxury cars may cost more to maintain than vehicles with standard features.
Your car plays a big role in your walk, or drive, through life. Doing a little work up front can help you make a smart purchase that you can enjoy for years. But no matter what you decide in the end, we know you'll make the right choice.
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2Nelson, J. (2023, January 09). How Much Down Payment Is Needed For a Car? Investopedia. Retrieved from https://www.investopedia.com/how-much-down-payment-is-needed-for-a-car-5184453