A car loan is something you get into for the long haul. While you may be buying for short term reasons, whether you need a car to get the errands done or need a car to get your job done, but you’re going to be paying your car loan for, quite literally, years. Here’s what you should think about before you sign on for a few years of payments.
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Budget First, Car Second
First, before you go car shopping, before you go car loan shopping, you need to sit down with your pay stubs and your bills and work out what car payment you can afford. It doesn’t matter what car you want if you can’t afford it, after all. This way, you won’t sign up for a car payment you can’t afford.
Also remember that you need to give yourself a reasonable amount of space within your budget. If your car payment eats up every dollar you have beyond the rest of your bills, it’s going to put you in tough financial straits elsewhere in your life and, ironically, make it pretty hard for you to make your car payment as well. Similarly, if you experience a financial setback such as losing your job or having to pay medical bills, it means you’ll have more room in your budget to make sure you still have a car to drive around to interviews or to get to the doctor.
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Get A Sense Of Your Monthly Payment
Once you’ve got what you can afford on paper, start shopping for car loans. It’s easy to forget that you’re buying a car loan, and the price you pay is the interest you rack up over the life of the loan. As you might remember, a car loan consists of three parts: The principal, or what you borrow; the interest, the price you pay for taking out the loan; and the term, which is how long you make payments.
Remember that a longer term will give you cheaper monthly payments, but will mean that you’re paying more interest overall since you’ll be making more payments. So when comparing car loans, ask yourself just how much interest you’re willing to pay to get on the road.
Research The Car You Want Carefully
Not all of us have the luxury of taking a week or two to look up the cars out there and how they suit our needs. Sometimes we need to get behind the wheel right away, or it’ll create a lot of problems in our lives. But even if you need to drive off the lot today, you can still take a moment and avoid getting more car than you need.
Before you decide on a car, look at all aspects of it carefully. What’s the mileage? If it’s used, what does the Carfax say about its previous history? How has the model held its value over the last few years? Do the same with the dealership; look up how their customers view them and whether they’re happy with the overall results.
If you need a car, you need a car. Just make sure that you can afford the car you need.