Checklist for Auto Financing

Do not Bite off More than You Can Afford

When choosing how much you are able to afford for a car payment, take a realistic inventory of your expenses. Write down whatever you buy for a week or two, that way you’ll be in a position to produce an honest budget for your new car. Your credit score will be best if your expenses are simply 30% of your income before taxes. You’re better off choosing a car you can comfortably afford over one you would have to stretch to make the payments on and saving money just in case of an emergency. One missed payment can hurt your credit and force you into a higher interest loan further down the line. In fact, FICO just recently released info about how your behavior affects your credit rating.

Do not Go to the Dealership Before Knowing Your Credit Score

If you have no idea what your FICO (credit) score is, do not even step foot on the lot of a car dealer. There is no sense in spending all day looking at and test-driving cars only to go through the finance manager’s office and conclude that your credit rating isn’t good enough to qualify for financing. Plus, knowing what your credit score is early might help you get financing through a private lender, which might get you a better interest rate than the dealer can provide you with. Many consumers are now applying online for financing before ever heading to the dealership. This gives them the freedom to negotiate with the dealer as a cash buyer; and in a good many cases, helps with getting an improved deal.

Don’t Forget About the Cost of Auto Insurance

Before you opt for a car, get insurance quotes. For young buyers or people with below perfect driving records, insurance can cost as much as or more than your car payment. Keep in mind that generally, the more you commit to your car, the higher your insurance bill will be, so just as you can produce the monthly payment on your dream car doesn’t mean you can actually afford it. Many items effect your insurance premiums in addition to your driving record, the sort of vehicle you are purchasing and the engine type to name a few.