Q: I’m ready to finance the purchase of a new car. What do I need to know before finalizing my auto loan?
A: Financing a new car is a big decision that will impact your monthly budget for the entire term of the loan. That’s why it’s important to weigh all relevant factors carefully before making your decision.
Here are five questions to ask before taking out an auto loan.
1. What is the actual cost of this car?
In many dealerships, the sticker price on a car and the one you end up paying can be vastly different. In some lots, you can negotiate with the salesperson to get them to lower the price. Meanwhile, in other lots, you may find out at the last minute that you need to pay extra fees that will bring the price up significantly. Before you sign on an auto loan, make sure you know how much you’re actually paying for your new wheels. You can do this by requesting the dealer to put the numbers on paper, so you can see the actual cost(s) written out.
2. Is this the lowest interest rate I can get from any lender without extending the term?
The interest rate on your loan determines how high your monthly payment will be and how much you’ll be paying overall for the privilege of financing your car. The range of rates you’ll be offered will depend on the lender, the market rates at the time, your credit score and credit history. Getting pre-approved is also a good idea that can let you know how much car you can afford and what your monthly payments will be. To get started with your pre-approval process today, fill out our loan application online .
3. What will my monthly payment be with this loan?
Your monthly payment will be determined by the loan amount, the annual percentage rate on the loan and the loan term. It’s best to use these details to run the numbers on a potential loan to be sure you can afford the monthly payments (check out our loan calculator here). You’ll be better prepared to incorporate this new payment into your monthly budget if you have a number to work with before finalizing the loan.
4. Are there any available incentives that can bring down the cost of this loan?
Before closing on a loan, ask the lender about any available incentives that can help you save on the cost of the car. Here are two incentives you may be able to access:
- The cash rebate.
This incentive allows borrowers to apply a dollar amount to the price of a vehicle, effectively bringing down the price. The borrower receives the discounted amount in a cash rebate when the loan is finalized. These rebates are typically offered regionally or under specific circumstances, such as to repeat buyers of a certain brand, buyers who have left a competing brand, recent graduates or members of the military.
- Dealer cash.
This incentive is similar to the cash rebate, but it’s offered by the dealer instead of the automaker. Dealers may offer these incentives near the end of the month, quarter or model year, as they scramble to reach a quota set by the automaker. The dealer will be compensated for reaching this quota and is consequently open to bringing down the price for the buyer. However, you’ll only know about this incentive if you ask.
5. Do I really need an extended warranty?
Dealers can be overly eager to sell extended warranties to new car owners, but these may not be in the buyer’s best interest. If you’re purchasing a new car, it likely comes with a factory warranty covering the vehicle up to 100,000 miles, purchasing an extended warranty can be an unnecessary expense. If you’re buying a used car, have it thoroughly inspected by a mechanic and get a detailed vehicle report on AutoCheck.com or Carfax.com to see if you need the extra protection that an extended warranty provides.
Are you ready to close the deal on a new car? SACFCU auto loans offer great terms, easy eligibility requirements for qualifying members and a quick application process. Call, apply for a loan online or stop by today to learn more.