Buying your next vehicle can be a decision made by necessity – you need a larger car due to an expanding family, or you want a smaller one because you have less space to park after a house move, for example – or through choice. Whatever your reasons for wanting a new vehicle, you are always going to need to finance the purchase.
Here are some of the best ways you can do that; get your finances in order before you buy, and you will be able to make the process a much quicker and easier one.
Sell Your Car
One of the easiest ways to finance a car purchase is to sell your existing one. You can search online if you want to sell your car to get the best price and then sell it ahead of time. Although this does mean that you will be without a vehicle for a little while, this inconvenience can be offset by the buying power that you will have if you are going to pay cash for the new car outright.
Paying cash is the cheapest way to finance a new car because you won’t need to take out loans or finance agreements which have interest added to them. Cash means just one payment and the car is completely yours.
If your current vehicle’s sale price doesn’t completely cover the cost of the new car you want, then you could use the money as a down payment, and finance the rest of it. Although you will still be taking out a loan, it will be a much smaller one which will be paid off more quickly and accrue a lot less interest.
Some car dealerships will accept a part exchange on their new vehicles, taking your old car and offsetting the cost against the one you want to purchase. Although this is convenient, you will have more power to negotiate if you are paying cash, so this is usually the best method.
If you can find a loan with a good interest rate, then this can be another good option for purchasing a new – or used – vehicle. After you have been approved for the loan, the lender will pay you the money, often directly into your bank account. This means that you can then effectively pay the car dealership or seller cash and, as we’ve mentioned above, this gives you the opportunity to haggle over the price or try to get some extras into the deal.
Make sure, however, that you can pay back the loan on a monthly basis. If you miss a payment or more than one payment, then your credit score will suffer and the interest will build as well as penalty charges.
An installment plan is similar to a personal loan in that you will be repaying the cost monthly at a set interest rate (or, if you can find a great deal, no interest at all). These agreements are done by the car dealership itself, and can often be quicker and more convenient than obtaining a loan from a bank.
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