Now is the perfect time to buy a new car—with low prices and hot financing options available everywhere you turn, there’s no better time to make the purchase you’ve been waiting for. But before you just jump onto the first financing deal you come across, you should remember that you have options and carefully consider which option makes the most sense for you. After all, zero percent financing for two years may seem like a great deal until you find out after two years that your financing jumps to 21 percent. Here are some of the best ways you can find good financing deals for your new car.
- The dealer. Obviously, most vehicle dealers offer financing. Many offer deals to their customers, such as zero percent for 72 months. But if you intend to take longer than 72 months (6 years) to pay off your vehicle, then this deal may not work out in your favor, unless you are able to secure another, better deal when the time comes.
- Look online for financing options. Everything is online these days, including financing options through multiple lenders throughout the country. With the internet at your side (or in front of you, rather) you’re no longer limited to securing financing from the local lender or local dealer.
- Go to your bank or credit union. If you already have a bank or local credit union that you are a member of, you may be able to get a smashing deal for financing.
- Pay cash. In reality, paying cash is rarely an option. But if you have the cash on hand, a decent trade-in, and are ready to take the plunge with the vehicle you’re about to buy, skipping financing options and financing your car with your own money can be the right option.
If you’re going to finance your vehicle instead of paying cash you may wonder just how much you should finance. The reality of financing is that it comes down to what you can afford to pay on a monthly basis over the long term. Most vehicle financing options are for six years. You should always divide the total cost of the car after taxes, licensing, fees, and warranties by 72 months, and then add the cost of automobile insurance, maintenance, and gasoline estimates, This is the total cost you can expect on a monthly basis for the vehicle you are about to purchase. You should only ever finance what you can afford to pay back. And remember, you will always be paying interest each month as well and that will factor into what you can afford. For example, if you want to purchase a $25,000 vehicle and it’s total cost is $29,400 after taxes, licensing, fees, and warranties, then your payment without interest will be $408 per month. Add to that $250 to maintain, insure, and fuel your vehicle, and you’re looking at $658 per month.
So remember, when it comes to financing, always think in terms of how much and how long.
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