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Auto Loans: Step-by-Step Guide to Car Financing

Posted by Aylin Poulton - 03 May, 2013

Many car shoppers, from first-time buyers to those who have owned several vehicles, find themselves overwhelmed more so by the financing steps than the process of choosing the right car. By following the proper steps and keeping a few important tips in mind, you can set up the best possible financing for your next car purchase.

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Plan a Realistic Budget

A realistic budget that indicates the highest payment you can afford on a monthly basis is the first step in finding the right car financing deal. Once you sign the financing agreement, an inability to keep up with the required monthly payments will result in repossession of your car and a big hit to your credit worthiness.

Don’t be Afraid of Haggling

The best way to help yourself achieve approval on a car financing package that fits your budget is to effectively haggle down the asking price with the salesperson. A lot of shoppers are afraid of or embarrassed by negotiating down the price of a used car, but this is a common and expected practice with which dealerships are prepared to contend. The worst-case scenario is the salesperson is unable to accommodate the price you are asking for, and you need to continue shopping.

Compare In-House & Outside Financing

You will be presented with two primary financing options while preparing to buy a new or used car. You can either choose to finance the purchase in-house with the dealership or through an outside lender like a bank. Compare the amount of financing you qualify for from each lending source, the interest rates that come along with the packages, and what you will inevitably pay in total. This information will clearly show you whether the in-house financing or outside lender is the best option for your unique circumstances.

Review the Financing Agreement Before You Sign

Once you have chosen the right financing option for your car purchase it is time to review and sign the loan agreement. No matter how much research and careful consideration you have put into the decision, it is vital to carefully read over the entire financing contract before signing. Be sure the terms present within the agreement are what you expected.

Financing the purchase of your new or used car is a simple process once it is broken down into its basic steps. Follow these steps with your budget in mind and you will end up with the car financing deal that best suits your needs.

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Topics: Car Financing

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