The decision to buy a new vehicle is a big and exciting one, and not one that many people come to lightly. There is a lot that goes into coming to that point, including landing a good-paying and secure job, being relatively debt free and having a decent credit score. That said, if you’re thinking about securing a car loan, there are a few steps you should take first.
Set a Realistic Budget
Just because you can finally afford a new car does not mean that you should be careless with your budget—even if your credit score says that you can afford that really nice Maserati parked in the lot. A new car is a luxury, and as with all luxuries, you should only plan to pay what you realistically can afford. Add up all of your monthly and annual expenses and subtract the total from your net income. Leave wiggle room for savings and emergencies. What you’re left with is what you can afford to pay.
Boost Your Credit Score
The higher your credit score is, the better, as that means the less you will have to pay in interest over the term of your loan. Whether your credit score is so bad that you’re only able to secure bad credit car loans or it’s so outstanding that the dealerships are begging you to buy from them, do what you can to improve it until shopping day. Even a ten-point boost can lower your rates by a few percentages.
Look Into Trade-In Values
If you own a vehicle already, don’t just let it sit and decay after you buy a new one. Rather, see if the dealership you plan to work with will do a trade-in. Even if your old car is only worth a couple grand, that couple grand will serve as a nice down payment—and a considerable down payment can help to make you look more reliable in the lender’s eyes.
The decision to buy a new vehicle is huge, so if you’re at that point in your life, congratulations! That said, don’t approach the process lightly, and get your finances in order before you start shopping.