Cars are pricey, with car prices hiking to over $48,000. But you have various options to help you pay for a car. Car loans are one of the most common solutions for most car buyers. They can make your car shopping experience easy and smooth. However, with interest rates skyrocketing in the country, securing a car loan might seem challenging. To help you with that, here are effective tips for getting a car loan in 2023 and saving thousands of dollars in interest charges and fees.
Key Takeaways:
- A car loan allows you to afford a new ride that could be outside your cash budget.
- Check your credit score and strive to boost it to increase your chances for a car loan approval.
- Preapproval can help you understand what car loan terms you’re eligible for.
- If you pay a larger down payment, it shows you’re serious about the purchase and poses less risk to the lender.
Check Your Credit Score
Your credit score significantly affects how much you can borrow and at what interest rate. You need to know where your scores stand before applying for any auto loan. The good news is that you’re entitled to a free copy of your credit report every year from each of the major reporting bureaus (Equifax, Experian, and TransUnion). So, visit AnnualCreditReport.com to get a free report.
Credit scores generally range from 300 to 850. To increase your chances of auto loan approval and secure the best interest rates, you’ll probably need a credit score of above 660. If your score is below 600, you may need to improve it before applying for the auto loan. However, if you have a poor credit score and need a car, you may want to consider cars that cost less. Also, putting down a larger down payment and getting a cosigner on your car loan can make it easier to get approved for the full purchase price of your potential car.
Determine Your Budget
Checking your finances will help you understand how large a monthly payment for the loan you can comfortably afford. Besides the monthly payments, you’ll also want to consider these costs:
- Initial Down Payment: In most cases, you’ll have to make an initial down payment on your car. The higher the down payment, the more likely you can secure a car loan at better rates. So, factor your down payment into your total upfront costs.
- Insurance: Car insurance is legally required in almost all U.S. states, although the coverage requirements differ. So, consider your monthly premium costs as you budget for your new car, and remember that these costs can increase or decrease depending on the type of car you purchase. Note that most lenders will require you to have car insurance before they approve your car loan.
- Maintenance: If you’re in the market for a new car, chances are you may not need to worry about significant costs for a while. But you’ll still need regular oil changes and other routine maintenance. And if you’re buying a used car, it’ll be worth spending some time researching models and makes that tend to require less maintenance.
- Gas: And obviously, you’ll have to pay for gas. Your gas expenditure will depend on how much you dive, the type of car you’re driving, and the price of gas.
Your lender will check your income-to-debt ratio to ensure you can comfortably pay your other debts, bills, and the car loan monthly payment before approving your auto loan.
Get Preapproved for Multiple Car Loans
A good rule of thumb is to get preapproved for a car loan from at least three lenders. Preapproval essentially means submitting a preliminary car loan application. Besides helping you boost your chances for approval and get the best loan terms, preapproval can give you a bargaining chip to use during car buying. To get preapproved for an auto loan, lenders will want to verify your documentation, including recent pay stubs and other income, your driver’s license, and recent tax returns.
Essential Note: Try getting all your auto loan preapproval shopping within two weeks to lower the negative impact on your credit score.
Find a Car That Fits Your Loan Budget
Now that you know whether you’re likely to be approved for an auto loan that fits your budget, you can now start shopping for a car. Depending on how much you can afford to borrow, you may consider a new or used car. However, before heading to the dealership, it’s wise to have an idea of the car model and make you want to buy and stay within your budget. Car comparison sites, such as Edmunds and Kelley Blue Book, provide valuable insight into car prices and potential trade-in value for your current car.
Pro Tip: Doing your research beforehand will help you narrow down your car options and make an informed buying decision. Also, you’ll determine if the dealership’s car prices align with the current market values.
Need Help Buying a Car in 2023? Ask the Experts!
You can streamline the car financing process by understanding your credit score, comparing multiple quotes, and getting preapproved for a car loan. Knowing how to get a car loan and understanding how much you can borrow can help you become an attractive buyer and move you closer to your dream car. If you’re ready to buy a car in 2023, visit Empire Hyundai of New Rochelle. We have a wide array of inventory, and we’re sure you’ll find your dream car in our dealership lot. Call us today for all your car needs!
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