Car Buying Tips
Buying a vehicle can be a fun and exciting time, but it can also be stressful depending on your financial situation. Whether you’ve saved enough money to finally buy your dream car, or if you’re looking to only spend the bare minimum for a basic used car to get you from Point A to Point B, the following tips could come in handy as you shop for your next vehicle.
Tip 1: Do Your Research
Don’t buy a car just because it looks cool or because it’s the cheapest car available. Do some research first. You might find ratings and reviews indicating that your target vehicle is not so reliable. In fact, you might find enough negative reviews about mechanical or safety issues that you decide to buy a different vehicle. In the end, doing some research might save you from a big headache and from having to pay big out-of-pocket repair expenses.
Another thing to research is pricing. Dealers and private-party sellers may mark up vehicle prices hoping that uninformed customers will pay those inflated prices. Don’t be one of those customers – go into any transaction knowing exactly what the car you want is worth, and don’t pay more than market value for that vehicle.
Tip 2: Know Where to do Your Research
There are so many websites dedicated to professional and customer reviews. To find the most reputable reviews, consider visiting sites such as Consumer Reports, Kelley Blue Book, Edmunds, and Cars.com. In case you’re worried that customer reviews might be fake, check out these Consumer Report tips on how to spot fake reviews.
Tip 3: Know How to Get an Auto Loan
Once you’ve researched vehicles and found the car you want at the right price, you might think that your research is over – wrong! You should also research your auto loan options. Doing so could save you hundreds if not thousands of dollars in interest, fees and add-on expenses. For more information, check out our information about car loans and how they work.
Tip 4: Decide How Long to Finance Your Loan
Ideally, you should strive to finance your auto loan for no more than four years (48 months). The reason to aim for four years is to limit the amount of interest you would pay over the life of the loan.
Many consumers decide to finance their vehicles for up to six or seven years to get a lower monthly payment. Even though the lower monthly payment is nice, the loan balance will remain higher for a lot longer. As a result, those consumers end up paying much more in interest, which is not so nice when it comes to their financial well-being.
There may be times that you need a new vehicle, but your circumstances dictate that you finance for longer than four years. If you find yourself in this situation, and circumstances later improve, remember to look at refinancing options to get more favorable loan terms.
Tip 5: Pick a Down Payment Amount
A big down payment will help reduce the amount being financed, and therefore, reduce your monthly payments and the amount of interest you will pay over the life of the loan. Many experts suggest a 20% down payment, so if you can afford that, make sure to do so.
Conversely, try to avoid putting no money down. Although it would feel good to avoid a big down payment, you will end up financing a larger loan amount, which means you would pay higher monthly payments and more interest over the life of the loan. Plus, for a significant amount of time, you would be “upside-down” on your loan.
Tip 6: Avoid Being “Upside-Down” on Your Auto Loan
Owing more than a car is worth is known as being “upside-down” on your loan. This is not a good place to be. The way borrowers get there is by:
- Not putting enough money down
- Financing for too long (longer than four years)
- Opening a loan with a high annual percentage rate (APR)
A good way to avoid being upside-down is to adhere to the principles of the 20/4/10 rule, which encourages car buyers to put 20% down, finance for no more than four years, and spend no more than 10% of their take-home pay on transportation costs.
Tip 7: Know Your Credit Score and How it Will Affect Your Auto Loan Options
Generally speaking, the higher your credit score, the lower the APR you may be able to qualify for. Conversely, if you have a lower credit score, you may be saddled with a higher APR, which may limit your buying options. Make sure to check your credit score so you will know what to expect when it comes to APRs.
Tip 8: Trust Affinity with Your Next Auto Loan!
When you’re ready to finance the vehicle you want, consider Affinity. We make the auto loan process easy with competitive rates and a variety of loan terms to choose from. There are no application fees or prepayment penalties, plus you'll get a 0.25% APR1 rate discount for setting up automatic payments. Learn more.
1APR = Annual Percentage Rate. Rate is effective as of 06/12/23. Advertised rate includes 0.25% reduction off the standard interest rate for setting up automatic payments from your Affinity account. The rate without automatic payments will be higher. Other rates and terms available.