Walking into a gleaming showroom and preparing to test drive a new car is a pulse-quickening experience for anyone. Yet buying a new vehicle can also be a stressful time if you're worried about not getting the best deal on financing.
To help you navigate this process with confidence, let's take a closer look at how to secure a great deal on a new (or refinanced) car loan.
Auto loans 101
The basics of auto loans work like this: A buyer agrees to borrow enough money to purchase a car from a lender. A contract is signed, and the buyer agrees to pay the lender back a certain amount of money each month for a term of up to six years.
The key number to focus on when evaluating loans is the interest rate. The lower the rate, the better the deal. In fact, securing a loan at a lower interest can potentially save a borrower thousands of dollars over the course of a loan.
Many people are under the impression that auto loans must originate at auto dealerships. The truth is that dealerships often simply serve as a middleman between car buyers and banks. Borrowers can arrange financing through a bank or credit union before their car search begins.
There's a significant benefit to this approach: By getting pre-approved before walking onto a lot, auto buyers can search for the most competitive rates at their leisure, rather than attempting to find financing in the high-pressure environment of an auto dealer showroom.
When seeking a loan, it's important to bring the proper documents. These include:
- Proof of income (paycheck stubs, for example)
- Proof of residence (utility bills)
- Legal I.D.
- Banking and credit history information
- Personal references
After you buy
It's important to be aware that -- even if you opted for dealer-based financing -- you don't necessarily have to stick with it. If you follow a few smart steps, you can secure a better deal by refinancing or getting a new loan from a bank or credit union.
By following these tips, you can buy a car without stressing about getting a good deal, or qualify for a better rate on your existing auto loan. This in turn will help you save money for other things.
Please contact KeyPoint Credit Union today for help securing a better deal on your auto loan.