Do High Interest Rates Mean It’s a Bad Time to Buy a Car?
Due to inflation, interest rates are on the rise. With higher rates, it can be difficult to find affordable auto loans when you need to go car shopping. Though it may take more effort to get better deals, you can still find financing that won’t break your budget. Experts recommend spending a max of 10% of your take-home income on an auto loan payment and a max of 20% on related expenses, such as gas, insurance, and maintenance.
Speaking of your budget, you should know how much you can afford before you start searching. You can use online “car affordability” calculators to determine your monthly payments and help you decide on a realistic price (a bit below the amount you think you can afford). How much you pay in interest overall will also depend on the loan term length. Make sure you shop around, check different rate options and get a fixed rate and term (which Lendmark offers!). This will protect you during economic downturns and inflation.
Keep reading for ideas on how to save on interest and overall cost when you’re shopping for your next car.
Research and be prepared
• Know the total amount you can spend on a car, then narrow your choices down. See which cars fit your price range, and check whether they have the features you’re looking for.
• Consider new vs. used. New cars often have lower APRs but higher price tags, meaning a longer loan term and more interest paid overall.
• Think about trading in your current vehicle, if possible. This can help with a down payment and decrease the amount you’ll need to borrow.
• Find out the market value of the vehicle(s) you’re considering by using tools such as Kelley Blue Book, Edmunds, Autotrader, or the National Automobile Dealers Association.
• Pre-qualify or line up financing before going to a lot. First, check your credit score to get an idea of your loan eligibility. Then, if you’re ready to apply, get pre-qualified or pre-approved, so you have a target price to prepare for negotiations with a salesperson. Financing at the dealership may not be your best option.
If you go to a dealership
• Wait until nearer the end of the year, when dealerships offer better sales on outgoing models.
• Find out if there are cash-back deals or other discounts at dealerships and watch for big sales events.
• Get a comprehensive price quote from the dealer that includes a list of all fees.
• Skip the extras. Salespeople will try to convince you on the spot to purchase added features. Unless you have specific ones in mind and have researched them, it’s cheaper to say no.
Don’t forget insurance
Find the best price for auto insurance by researching and comparing policies from different companies, getting only the coverage you need, and taking advantage of policy discounts. Be aware that the terms of an auto loan may require you to purchase full-coverage insurance.
If you need help financing your next car purchase, talk to a Lendmark loan expert. We offer simple loan options with fixed rates for new or used vehicles. You can also check your possible rates without impacting your credit score. Drop by a local branch or get started online.