There are so many things to keep in mind when buying a car besides getting a good deal. Your credit score, eligibility, and budget all play a role in what kind of car you can buy, and how much you’ll pay in repayments. Here are some things to remember when buying a car, whether it’s new or new to you.
Checking your credit score
This should be your top priority before making any major purchase. Your credit score, also known as your credit history, is a detailed application and repayment history for credit and other financial items like loans. These are usually scored between zero and 1200 (or 1000). Anything below 2/3rds that score is considered below average, affecting the interest rate you’ll end up with. Knowing your financial options ahead of time might help you review your money and make smarter decisions.
Your credit score may be affected by errors in your credit history. You must dispute and delete credit history mistakes to help improve your credit before making any credit application.
Are you eligible?
Are you eligible for auto finance? You need to look at the lending criteria for most banks or lenders to see if you qualify. This usually means you should be over the age of 18, a permanent resident or citizen, and making above a certain income. This income level varies depending on the amount borrowed, credit history, and age of the vehicle. Older vehicles may attract higher interest rates due to being higher risks.
Budgeting and doing your math
When searching for a car, it's important to establish a budget. Here's a handy guide to help you estimate your potential purchases and calculate your monthly repayments. Presenting a well-crafted plan and providing evidence of your ability to repay your car loan will leave a positive impression on your lender or broker. Check out car loan calculators to get a rough idea of your finances, so you're prepared to answer any questions a broker might ask.
Shopping around – for cars and finance
You wouldn’t buy the first car you see – and the same goes for finance. Make sure you shop around at different banks and lenders before settling on a good loan deal. To make things easier, you can apply through a car loan broker. They will find many different loans on your behalf and set you up with the most favourable package.
Timing your purchase
Timing your car purchase can save you a lot of money. Dealers generally have the greatest prices at the end of the financial and calendar year if you can wait. If you can't, wait until the end of the month when sales figures decide whether a dealer receives a bonus (or worse!). Pre-approval for a car loan gives you an advantage in negotiations, as it sets price ceilings dealers need to match, or miss out on the all-important sale.
Doing a bit of budgeting, research, and financial preparation can get you a great price on a car!
