Getting an easy car loan isn’t great for your finances because you have to pay interest on an asset that depreciates from the moment you drive it off the lot. Expensive car payments can also make accomplishing other goals harder. Still, despite the fact easy car loans have downsides, most people get them anyway for a very simple reason, i.e. they need cars and can’t afford to buy them with cash.
If you’re shopping for an easy car loan, you can do so responsibly- you need to be smart about where and how you secure financing. Here are important steps to take to ensure you’re a responsible borrower when you buy a car.
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Shop for financing outside the dealership: Far too many borrowers get financing through their car dealer without giving a second thought to whether this is the best deal. Because best dealers frequently advertise special promotional financing, it’s very tempting to take out a loan and hope for the best. In some cases, you’ll get a good deal by borrowing through the dealer, especially if you have good credit. But, dealers also profit from financing, and the rates and terms they offer aren’t always the best. Instead of defaulting to dealer financing and the car price, you want to buy and explore all your loan options through banks, online lenders and credit unions. You may also decide to get creative with vehicle financing. For example, if you’re going to pay off the car within around a year of buying it, you may be able to use a credit card to pay for at least part of it. You could also pay for part of the car on a card with a 0% introductory rate on purchases, but dealers will limit how much of the car you can charge.
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Borrow the minimum: If you have to borrow to buy a car, you shouldn’t be buying a very expensive vehicle. A recent auto financing report revealed millions of people borrower financed for new cars- a new record and an amount that slightly exceeds per capita incomes. With record-high balances and average interest rates up to 5.17%- an increase of about a third of a percentage point compared with a year ago-borrowers are paying more than ever for new vehicles with monthly payments.
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Don’t stretch out your loan term: Borrowers are taking out loans that last longer than ever. Average loan lengths for new vehicles reached 69 months in the first quarter. If you take eight years to repay your car, or even 5.7 years, chances are good that you’ll be itching for a new car as soon as it’s paid off. You may never get any time when you don’t have car payments and devote your income to building wealth.
Be smart about your car loans.
Driving a safe and reliable car is important, but that doesn’t mean you should borrow a fortune for one. Instead, finance your car with the lender offering the best deal, but the low-priced car you’re comfortable with and finance a car for the shortest term you can afford, and you’ll be in much better shape for the long-term.
Source URL: https://www.freedomcars.com.au/about
