3 Things to Know Before You Finance Your Next Vehicle

By Civic Federal Credit Union
5 min read
March 29, 2021
3 Things to Know Before You Finance Your Next Vehicle

Let’s face it, most of us are not able to purchase a new or used car with cash. Car loans are simply part of the car buying process. So if a new car is in your near future, it is important to look into financing options now - before you enter any dealership or used car lot.

Why? Because it matters how you move through the buying process. It can impact your payment amount, the types of loans available to you, and the interest rate attached to your auto loan.

Not surprisingly, many people spend weeks or months researching the make, model, and reviews for a potential new or used car. Once the decision is made, we tend to think about the financing part as an after-thought and simply the final step of buying a car and driving it home.

Once you enter the dealership, you may be focused on getting the car and likely settle for higher interest rate loans that are offered to you on the spot. The stronger position is to know - in advance of any purchase - where you stand and how some financing options may fit with your unique financial situation.

Remember: In addition to your new or used car, your loan will come home with you.

Sit in the Driver’s Seat

Before you go to purchase a vehicle, spend some time looking at financing options. Knowing a few details about how lenders think and your situation can empower your position during the entire buying experience.

Here are 3 things to know about auto loans for new and used vehicles.

1. Your credit score matters.

Know what lenders care about. It is no secret that building credit is important. It directly affects the type of loan you could get. You can check your credit report for free one time per year here. As a reminder, each time you or someone else checks your credit, the score takes a little hit. When shopping for a car, try to have any credit checks done within 14 days. That way, the credit agency will view them as one bundle and not as individual credit checks, lessening any impact on your score.

2. Remember to finance what you can afford.

There is no question a brand new or ‘new to you’ used car will be amazing to drive home. Take care to understand the financing special deals, arrangements, and ‘no money down’ offers. They can cloud the true, long-term cost of the car. All told, you must make sure you can afford the vehicle. Bottom line: a loan is an agreement to pay back. And making the monthly payments is crucial to the integrity of the loan and your credit score. Confirming you can make the payments now will avoid any chance the vehicle could be repossessed for nonpayment. Customer service at a credit union or bank — or this auto loan calculator — can help you best understand what you can afford.

3. Walk in like a cash buyer.

To do this, you need to research a bit before stepping foot onto a car dealership or used car lot. By getting pre-approved, you have essentially turned into a cash buyer. Walking in with the pre-approval in your hand instantly shifts the negotiation power in your favor. And it can help keep you focused on your budget. Credit unions can offer some of the lowest rates with smaller loan minimums. And, since they are member-owned, they are willing to work with their members to design a loan that fits the member’s needs. Pre-approvals can be taken care of online or over the phone at credit unions, banks, or online lenders.

Car Loans as Low as 1.99% APR*
Quick, easy pre-approvals for new or used cars

Whether your final decision is a new or used car, either way, knowledge is power. And with options in-hand, you will be prepared to purchase a car you love with a payment you can afford.

Disclaimer: You + Money blog posts are provided for informational purposes only and not intended to replace the advice of a financial, legal or accounting advisor.

*Subject to approval. Rates and credit limit are evaluated based on member’s credit history. Borrowers must be at least 18 years old and live in NC, SC, GA or VA. As low as rate indicates .25% APR discount for using auto debit from a Civic deposit account.

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