If you’re hunting for your next vehicle, and you’ve made the decision to opt for a pre-owned model, chances are you’re also shopping for financing options. If that’s the case, you may face more challenges than buyers purchasing a new vehicle. While new vehicles cost more than pre-owned models and have a sharper depreciation rate, they also enjoy lower financing rates that make managing the cost of borrowing for a vehicle purchase easier. Despite that, there are things car buyers can do to ensure they get a fair rate with great monthly payments. Let's take a look at some of the practices that can help.
Before you start shopping, check your credit score. While financing departments at reputable dealerships like Jay Hodge Ford of Morrilton are adept at finding financing solutions for buyers at all credit levels, knowing where your credit stands will help manage your expectations and guide your hunt for the right financing opportunities. There are several online services that can provide you with quick, free access to your current credit score. In addition, you’re entitled to a free credit report from all three credit bureaus every year. A higher credit score often translates to better interest rates, meaning lower monthly payments and overall savings. If your credit score is less than ideal, you might want to consider steps to improve it before applying for a loan.
Set a Realistic Budget
While it’s easy to get excited about all the advanced safety, technology, and driver assistance features available in the latest vehicles, it’s important to remain practical about what you can afford to spend on your next vehicle. Most financial experts recommend keeping your transportation budget at or below 15% of your monthly income. When you’re calculating your monthly budget, include the price of the vehicle, the energy costs, insurance costs, and annual maintenance and repairs.
Your monthly payment is determined by the price of your vehicle, the term length, and finally, the interest rates of the loan. Finding the best rate for your financial situation requires you to shop around. Check with your bank, credit union, or other financial institutions to compare rates. Many credit unions, for instance, offer lower interest rates on car loans compared to traditional banks. Online lenders can also offer competitive rates, so explore all options before making a decision.
While longer loan terms might seem attractive because of lower monthly payments, they often come with higher interest rates and increased total costs. Aim for a loan term of three to five years to minimize interest charges and prevent negative equity, where you owe more than the car’s value. Shorter terms can save you money in the long run despite the slightly higher monthly payments.
If you’re shopping for a pre-owned vehicle and you’re interested in finding affordable financing, visit us at Jay Hodge Ford of Morrilton. Our pre-owned inventory has a diverse selection of vehicles that include powerful trucks like the Chevy Silverado, as well as SUVs, economic sedans, and roomy vans. Our finance team will help you find the financing solution that fits your short and long-term financial goals and aligns with your budget. Visit us today.
