Purchasing a car is a big decision in your life. You need to consider many factors, such as your lifestyle, wants, and needs. However, your finances are one of the biggest factors in the decision-making process. Besides buying a house, buying a car is one of the largest purchases you will ever make, so having a solid grasp on your finances before you walk into the dealership can make the process run much more smoothly.
Check Your Credit
If you plan on buying a car, checking your credit score should be your first move. Financial institutions use your credit score to determine how reliably you to pay back loans, so if you need to take out an auto loan, a better credit score will make you eligible for more money and better interest rates. Also, if you take a look at your credit report, you can see what factors have influenced your score.
Make A Down Payment
A down payment reduces the amount that you owe on your new car. Therefore, it also reduces the amount of your auto loan — and its accompanying interest. As a general rule, it’s a good idea to put 10-20 percent down when you finance a vehicle.
Make A Budget
When making a budget for buying a car, it’s good to have an idea of how much you can afford to pay towards your auto loan every month, after factoring in the original down payment. However, keep in mind that you’ll also need to think about costs, like routine maintenance, which includes inspections and oil changes, the trade-in value of your old vehicle, and interest rates that extend the life of your loan.