It seems we all want a new car, but before you go out and purchase a new vehicle, try and lower your current loan first. Purchasing a car can be very expensive if you do not have a high credit score or a decent downpayment. With buying a new car, you have to remember the total cost of your investment. You have to pay your monthly loan payment, gas, insurance, maintenance, car washes, and more. I have a few tips to help you save money in 2020 on your current or next auto loan. Just keep reading, I got you.
Here are six strategies to help save you money on your auto loan:
1. First thing first, Have a credit score of 620 or higher. Your credit score has the largest impact on the terms of your auto loan. The higher your credit score, the lower the interest rate. The lower the interest rate, the better the terms of your auto loan. The less you pay over the time of the loan, the more money you save. If your credit history isn't the best, it's going to cost you. So if you have credit problems, put off buying that new car until you've repaired your credit.
2. I would avoid small loans. In many cases, interest rates tend to be higher on smaller loans. If the car costs less than $6,000, then it's best to save your money up and pay cash for the vehicle. If you're in desperate need of a car, I understand this may not be an option for you. So then I would recommend a buy here pay here lot until you can increase your credit score.
3. Refinance. You can refinance an automobile at a lower interest rate if interest rates have fallen since you bought the car. Refinancing makes sense if you've also been able to increase your credit score since you obtained your auto loan. You could easily save hundreds of dollars per month by refinancing.
• I would recommend you save the difference of your reduced monthly payment. You can apply the extra money towards other investments, your savings account, or you can pay off your car early.
4. Shop for financing. It might seem easier to get your financing at the dealership, but it's rarely the best place. Finding a better financing offer means extra money that could be in your pocket instead of the dealer's. I recommend getting approved through a credit union, the interest rates are lower, and they have better terms.
• Check out what the dealer has to offer, but get some other financing quotes and see what makes the most sense.
5. Consider leasing. While leasing is usually considered to be more expensive in the end than purchasing, it can make sense if you never own a car long enough to get it paid off.
• Your monthly payment will likely be less, and the taxes are less since you usually only pay tax on your payments, not on the value of the car. So that means no temp tags for six months. (LOL I kid) All the maintenance of the vehicle comes with the lease in most cases, making a lease a better investment.
6. Find a less expensive vehicle. No need to keep up with the jones. Get a car you can afford comfortably. You should spend no more than 15% of your net income on transportation. That includes your car payment, auto insurance, tags, gas, and maintenance. Overspending on your auto loan can cause future financial hardships. All the extra cost has little to do with how reliably or safely the car will get you from point A to point B.
• Consider purchasing a slightly used automobile to save some money. I recommend you buy a recently returned lease. A typical lease term is 36 months. Once the lessee lease is up, they return the vehicle, and the price drops significantly. Buying a lease is your chance to get a fairly used vehicle with low mileage. If you can find a car with low mileage, you get all the advantages of a new vehicle, including the warranty, without the original car cost and depreciation.
There are multiple ways to save money on your auto loan. If you have the time, it's vital to repair any past credit mistakes and, most importantly, shop around for the best financing terms. However, remember not to allow the finance company to pull your credit report too many times because inquiries can lower your credit score as well. Now I feel confident you are ready to reduce your current auto loan or obtain a new one with ease. Thanks for reading, please leave me a comment, and if you enjoyed the read, please share.
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