What to Prepare for When Getting Your First Auto Loan
Borrowing to buy a first automobile is not a complex financial transaction, but it can be stressful if you aren’t prepared ahead of time. The key to making both sides of the purchase work well, is to understand why they should be separate, and how to prepare to obtain financing before you make any attempt to purchase the car.
The First Step
Before you do anything else, go to your bank or credit union and find out about getting pre-approved for your loan. This does two things. One, it makes it much easier to negotiate on price, because you know what you can afford to pay. Two, it divides the process of financing, from the process of making the purchase. Doing both at once presents hazards that can end up costing you a lot.
Why Separate Loan from Purchase?
Borrowing money is a financial transaction and is ultimately a purchase, no different than buying any product or service. It should be conducted on its own terms and with its own set of goals. Buying a car is a separate financial transaction. You have a different goal in mind, and a wide variety of considerations that have nothing to do with borrowing money. If you try to combine the two transactions into one larger hybrid negotiation, the results may not be as good.
Examine Your Credit
That pre-approval is going to be much more advantageous if you take a hard look at your credit ahead of time. Credit reporting services will offer you different ways to evaluate your credit score, and to check your report for inaccuracies. Some auto dealers might work with a reporting service like NCC Direct, Inc. and this can let you look up reports while there. If you can clear up any question marks before you make an attempt to obtain financing, you may find you get a better rate, and end up paying much less for your car than you otherwise would.
Learn To Negotiate
Don’t fall in love with the car you want to buy. If you find you aren’t able to come to a reasonable arrangement with the dealership or seller, walk away. Your power in any negotiation is the power to simply excuse yourself, and go find a better deal. This kind of thinking will go a long way toward making sure you won’t end up making a bad deal or paying too much.
While this process may seem complicated, it isn’t all that difficult if you remember to take things one step at a time, and to not try and do too much at once. Learn the technical details and you’ll find this is the best way to save money and get a much nicer car.