Three Things You Need to Do Before Buying a Car

You did it. Maybe you’ve scraped and saved enough for a down payment on your first car, or you’re replacing a beloved beater that has outlived its reliability. Either way, buying a car is one of the largest investments you’ll ever make. Before buying a car, it’s important to research the make and model you want, get a pre-approval letter, and test drive the car you want.

Rearch, Research, Research

There are many outstanding car buying sites that also have links to interest rate calculators, reviews, and quality ratings for both dealerships and the cars themselves. Use these tools to your advantage. The last thing you need is some serious “sticker shock” when that first payment comes due, for example, or realizing the car of your dreams is a dud.

By thoroughly researching several models in your price range, you’ll gain a realistic view of how much you can really afford (don’t forget to obtain several auto insurance quotes) in a car. Ask friends and co-workers for a referral to a good local dealer or car-buying website. Word of mouth is more powerful than any online review, and you’ll gain real-life insight into ownership of a particular car.

Get Pre-approved

Financing a car is one of the most significant financial transactions you’ll ever make, aside from buying a home. By applying for financing through financial institution, you’ll know in advance how much you’ll qualify for, your interest rate, the length of your loan, and how much you’ll pay in interest over the life of the loan. Those low payments that come with that 72-month loan term look tempting, but you’ll pay more in interest over the life of the loan if you don’t qualify for zero-interest financing.

Apply to two or three financial institutions for the best rate on a car loan. Take the approval with you to the dealership. In some cases, the dealer may be willing to meet or beat your bank’s offer. Be sure to read any offers carefully, especially the fine print. Car loans can be intimidating to a first-time buyer, so don’t hesitate to have someone with you who can help you sort through the fine print.

Some dealerships will offer in-house financing as an incentive for using their lender or finance company. If you have a high credit score (in some states your approval letter will contain a credit score disclosure) you’ll have many more financing options than if you had a low credit score. Either way, pre-approval is key to staying within your budget and sticking with cars you can afford.

Some questions to ask when financing a car include: is there a pre-payment penalty for paying off the loan ahead of time? Is the interest rate fixed or variable? Are there late payment penalties? While many lenders provide clear, plain-language approval letters and disclosures, never hesitate to ask any questions regarding the car loan. Interest rates for new cars may be lower than for used cars, so read the pre-approval letter carefully.

The Test Drive>
Approximately 20% of used car buyers don’t take the opportunity to test-drive the car before buying. Whether the car is new or used, always take it for a test drive. At the very least, listen for unusual noises, be alert for any unusual odors, pulling to one side when braking, smoke coming from the tailpipe, and rough handling. All of these indicate the car is in rough shape and it’s best to pass it up.

When test-driving a car, also make sure the controls are within easy reach, the air-conditioning and heating work well, the sound systems works well, and the power features are in good working order. Lastly, in Bluetooth-equipped cars, check to see if the Bluetooth system pairs with your phone or MP3 player.

Buying a car is a sizeable commitment of time and money, so you want it to pay off wisely in the years to come. Do your research, obtain a pre-approval letter, and do plenty of test drives to find the car that is perfect for you. Always take your time when buying a car. Never let the seller or dealer rush you into anything you don’t want.

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