You want to make the right choice and smart decisions when selecting your next car – whether you’re in the market for a family car or a prestige vehicle. Maybe you’re recovering from financial difficulties or your credit rating is stellar. Perhaps you’re choosing between buying or leasing. If you’re thinking about buying a car, you’re probably thinking about financing. Getting your head around financing can be difficult, however you can make good choices by keeping a few helpful tips in mind.
“Do your research in advance and don’t let the facts and figures overshadow your excitement as you look into buying your next car,” said Alan Holgate, retail services director of Buy Now, Manheim’s fixed price sales channel. “With a few simple tips and preparation, you can feel confident that you are making the right choice financially in your next car purchase.”
Money Matters: Six Helpful Car Financing Tips from Manheim
- Don’t jump into a long-term car loan strictly for the lower monthly payment
Occasionally a higher payment is better if that offsets the length of your loan term. Financing a car over a longer term can result in higher interest rates, which could mean you pay more for the car in the long run despite the lower monthly payment. Thinking long-term with a short-term loan could save you hundreds or even thousands of dollars over time. Do your future self a favour and consider the big picture when deciding on the length of your auto loan.
- Finance instead of paying with cash when the interest rate is right
Surprisingly, sometimes having a car payment actually can be a smarter financial decision than paying cash for a car. The primary situation in which you should finance rather than pay in full with cash comes when interest rates are especially low. Even if you’re given a rate as low as just a few percent, it can be smarter to consider financing in order to build a healthy credit history and keep extra cash on hand that you would have used for the vehicle up front.
- If you have weak credit, produce a hefty deposit
Don’t be disheartened if your credit history isn’t squeaky clean. Instead show lenders that you are serious about your finances by spending a good amount on the down payment. A reasonable deposit is 20 per cent, some lending institutions believe the more equity you have in the car, the less likely you’ll be to default on the loan.
- If you’ve ever filed for bankruptcy, you still have options
After filing for bankruptcy you may find it difficult to finance a car while you rebuild your credit, but it isn’t impossible. Think beyond traditional banks and look at places that may have a slightly more relaxed lending practice, for example CarLoans. Be smart and don’t try and buy a more expensive car than what you can afford.
- If you’re planning to lease because you want a new car, try buying CPO
Leasing may be tempting if you can get a brand new vehicle with a low monthly payment. However, you should consider the benefits of buying certified pre-owned (CPO) instead. When leasing a car, you are not building equity like you would when you purchase a vehicle. So, when your lease ends, you may not have trade-in value to use on purchasing your next vehicle. Instead of leasing, look into purchasing a CPO vehicle and you will come out of the deal with a like-new car at a more affordable price, new car perks and peace of mind, knowing the manufacturer of the car stands behind it with factory warranty and an authorised inspection.
- Check car insurance rates before buying a vehicle
Call your insurance company to get a quote for the vehicle you’re planning to buy before signing on the dotted line. Insurance rates may be higher than expected when buying a newer vehicle, financing a vehicle or buying the car for a young driver. Also, shopping around for the right insurance deal can save you money. A quick call to your insurance company prior to your next car purchase can help you can plan your finances accordingly.