If you are buying a car, there are some questions to ask when financing a car that can help you make the right decision about your used car and the car loans that are available to you. Here are eight of the most important questions that you should be asking:
- How much can I afford? There are a lot of variables that go into choosing a particular car, but this is definitely one of the biggest. You need to consider not only what kind of car you want, but also how much of a down payment you have and how much you can afford to pay every week on your salary. You need to be realistic about your financial situation both at the moment and for the foreseeable future.
- What is my credit history? When you’re looking for car loans, your credit history becomes a serious issue. If you don’t know the status of your history right now, then find out. If your a few months away from making a purchase, this is perfect. You have the opportunity to overcome some of the things that are causing you to have bad credit.
- What kind of extras do I want? Of course, everyone has to get compulsory car insurance. But there are plenty of options available to you beyond that. Some dealerships offer insurance and warranties for an extra charge that will cover absolutely everything that is in or on your car. This can be especially helpful if you’re dealing with electronics, which are usually not included in the standard warranty and are also the most likely to break.
- How much flexibility do I need? When sorting through car loans and the various options available, you want to consider all the different fees. Will there be a fee for early repayment or early termination? You want to know what potential costs could come up with your financial situation changes and then decide whether you need flexibility or not.
- What is the comparison rate for the car loans I’m looking at? The comparison rate is the rate of interest that includes all the fees and charges that come with a car loan. These are additional costs over and above the established interest fees. Find out what these are and how they are included before you make any decision among different car loans that are available to you.
- How long should I be paying off my car? In other words, how long should the terms of your loan be? Basically, when it comes to car loans, the longer the loan term the more interest it will accumulate and the more fees you have to pay. However, if you can’t afford much of a down payment, it’s possible to get longer loan terms. Think about the car you’re getting, it’s potential lifespan, and what you can afford.
- Should I get a variable interest rate or fixed interest rate? Fixed interest rate car loans will never surprise you. Budgeting for your loan is easy because the loan amount stays consistent from month to month. Variable rates change over time, going up or down as the market demands. If you are sure that interest rates are likely to go down and you don’t have a long-term loan, variable-rate loans could be a great idea. If interest rates are fluctuating or seem likely to go up in the near future, or if your loan is for a pretty long period of time, a fixed rate is probably your best bet.
- How much deposit do I need? It is possible to get car loans that cover 100% of the value and require no deposit at all. If you have bad credit history, however, it’s unlikely you’ll be able to get one of these car loans. Additionally, you’ll save a lot of money if you can put down at least 20% of the value of the car as a down payment.
These are just some of the questions you should be asking yourself about financing a car. Be sure to consider all of these factors and talk to your used car dealership about the options open to you.