Three Money Saving Tips For Buying A Used Car

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Unless you have the cash to buy a vehicle outright, you will need to get an auto loan to finance your purchase. Just because you need a bank's help buying a vehicle, however, doesn't mean you have to pay exorbitant interest rates or fees for the assistance. Here are three money saving tips for buying a vehicle without spending more than needed.

Go for the Shortest Term Possible

To minimize the risk of defaulting on your auto loan, you should get a vehicle in a price range that fits your monthly budget. In an effort to reduce the payments on a car that may be outside of their optimal price range, some people choose to get a loan for a longer period of time. While it's true that extending the loan over six years rather than four can significantly reduce your monthly payments, you'll end up paying more for the loan.

First, banks typically charge higher interest rates for loans that have longer-than-normal terms, because the risk of default increases. So you'll end up paying more interest on starting from day one. Second, even if you managed to get the same rate as you would with a shorter-term loan, you would still pay more for the vehicle by virtue of being charged interest for a longer period of time.

Unless you absolutely know you'll be able to pay the loan off early, it's better to take a shorter term with the higher payment than one with the longer term and smaller payment to save cash over the long haul.

Wait Until You Qualify for Zero Percent Interest

Automakers build cars to sell them, and many times they will offer their own financing to customers in an effort move inventory. Since the manufacturer makes its money on the vehicle sale instead of the loan, it's not unusual for a company to offer a zero percent interest note. This is, perhaps, the best type of financing because you're essentially buying the car at cost.

However, you typically must have a high credit score to qualify for a zero percent interest loan. In fact, one survey found the average score for people who qualified for loans with interest rates of 1 percent or less was 752. Your score doesn't have to be that high, but it should be a minimum of 700. So if your score falls in the high 600s, it may be worth the effort to boost your number so you can qualify for this type of offer.

There are many simple things you can do to improve your credit score including

• Cleaning up mistakes such as misreported accounts
• Paying your bills on time
• Paying down your existing credit or asking for credit limit increases (this helps improve your credit utilization number which, in turn, improves your score)
• Bargaining with collections agencies to have negative accounts removed upon payment

There are many other things you can do to improve your credit score. Taking time to research and implement them can save you thousands of dollars in interest.

Research the Cost of Ownership First

There are other costs involved with purchasing a vehicle besides the monthly payments you'll be making on the car note. In addition to buying auto insurance, you will also eventually need to maintain and repair the vehicle to ensure it remains safe to drive and lasts a long time. Even if you score a great loan, the cost of owning the vehicle may still put it beyond your reach.

Take time to research how much your insurance payments will, how often maintenance needs to be done on the vehicle, the average cost of repairs, and even the type of gas the vehicle requires (premium gas means a higher cost to run the car). This will provide you with an idea of just how affordable the car really is.

For more money saving tips for buying a used car or help picking out the best one for you, contact a used car dealership or check out a used car search engine like AK Car Finder.

10 January 2017