The Financing Guide for First-Time Car Buyers
Next to a home, your car is the single biggest purchase you will ever make. So, this means a lot of decisions, one of which involves financing. Here at Sport Chevrolet, we want to make sure you are ready, so we have compiled the following advice to help guide you.
Know What you Can Afford
If this is your first-time shopping for a vehicle, you may have no idea what your price range is. A good rule of thumb is to spend no more than half your annual salary on an automobile. Keeping this figure in mind, go ahead and browse our online inventory to see what you can get for your money.
While half of your annual salary is ideal, you may actually need to spend less if you have other outstanding debts such as student loans. But if you expect an increase in income soon, you could possibly go a little higher. So, think about your income as well as your overall financial health when deciding how much to spend on a vehicle.
Consider Pre-Approval
Imagine you have found the perfect vehicle but can't buy it because you are unable to obtain financing. Pre-approval helps you avoid this scenario by making you aware of possible snafus ahead of time. You can also get a better idea as to whether or not you'll need a co-signor and will therefore have more time to try and secure one.
Decide How Long to Finance
After deciding how much to spend, the next question you'll have to answer involves the amount of your monthly car note. Generally speaking, your car payment should be between 10% and 15% of your monthly take-home pay. Keep this in mind when deciding how long to finance.
You'll pay less each month when financing your vehicle for a longer period. However, you will also spend more money in the long run-in order to pay off your loan. If you are wondering how the different terms will affect your monthly car note, our handy payment calculator tool will help give you a better idea.
Think About your Down Payment
By placing a down payment, you can greatly reduce the amount you pay monthly. If you can afford a down payment, somewhere between 10% and 20% of the purchase price is ideal.
Of course, if you do not have any money to put down, that's fine too. Our team of finance experts can likely get you approved either way.
Consider Taxes and Other Fees
The thrill of buying a new car can be short-lived if you are hit with unexpected expenses shortly thereafter. Sales tax, licensing, and registration fees are something everyone must deal with, yet tend to catch people off guard. Some buyers get around this by financing those fees in with the loan. Alternately, you could also deduct those costs from any down payment you were planning to make.
Understand the Difference between Interest Rates and APR
The Truth in Lending Act requires lenders to fully disclose their Annual Percentage Rate (APR) to borrowers. An Annual Percentage Rate includes the amount of interest being charged as well as any fees associated with the loan. Accordingly, you may notice that the APR is slightly higher than the interest rate you were expecting. Be sure you know what fees are included in the APR, and don't be afraid to question anything you don't fully understand.
Compare Rates and Terms
The loan with the lowest interest rate is not necessarily always the best one. To choose the best deal for your money, you must also consider the terms of your loan. Some things to take into consideration include:
Easing the Stress of First-Time Car Buying
Years from now, we want you to look back on your first car note with fond memories. That's why, here at Sport Chevrolet, we do everything we can to make financing as easy as possible. Allow us to make buying that new vehicle a smooth, easy process.
Know What you Can Afford
If this is your first-time shopping for a vehicle, you may have no idea what your price range is. A good rule of thumb is to spend no more than half your annual salary on an automobile. Keeping this figure in mind, go ahead and browse our online inventory to see what you can get for your money.
While half of your annual salary is ideal, you may actually need to spend less if you have other outstanding debts such as student loans. But if you expect an increase in income soon, you could possibly go a little higher. So, think about your income as well as your overall financial health when deciding how much to spend on a vehicle.
Consider Pre-Approval
Imagine you have found the perfect vehicle but can't buy it because you are unable to obtain financing. Pre-approval helps you avoid this scenario by making you aware of possible snafus ahead of time. You can also get a better idea as to whether or not you'll need a co-signor and will therefore have more time to try and secure one.
Decide How Long to Finance
After deciding how much to spend, the next question you'll have to answer involves the amount of your monthly car note. Generally speaking, your car payment should be between 10% and 15% of your monthly take-home pay. Keep this in mind when deciding how long to finance.
You'll pay less each month when financing your vehicle for a longer period. However, you will also spend more money in the long run-in order to pay off your loan. If you are wondering how the different terms will affect your monthly car note, our handy payment calculator tool will help give you a better idea.
Think About your Down Payment
By placing a down payment, you can greatly reduce the amount you pay monthly. If you can afford a down payment, somewhere between 10% and 20% of the purchase price is ideal.
Of course, if you do not have any money to put down, that's fine too. Our team of finance experts can likely get you approved either way.
Consider Taxes and Other Fees
The thrill of buying a new car can be short-lived if you are hit with unexpected expenses shortly thereafter. Sales tax, licensing, and registration fees are something everyone must deal with, yet tend to catch people off guard. Some buyers get around this by financing those fees in with the loan. Alternately, you could also deduct those costs from any down payment you were planning to make.
Understand the Difference between Interest Rates and APR
The Truth in Lending Act requires lenders to fully disclose their Annual Percentage Rate (APR) to borrowers. An Annual Percentage Rate includes the amount of interest being charged as well as any fees associated with the loan. Accordingly, you may notice that the APR is slightly higher than the interest rate you were expecting. Be sure you know what fees are included in the APR, and don't be afraid to question anything you don't fully understand.
Compare Rates and Terms
The loan with the lowest interest rate is not necessarily always the best one. To choose the best deal for your money, you must also consider the terms of your loan. Some things to take into consideration include:
- When and how late charges are assessed
- Possible penalties for paying your loan off early
- The lender's reputation
- Whether the offer includes a low introductory interest rate that could possibly increase over the life of your loan.
Easing the Stress of First-Time Car Buying
Years from now, we want you to look back on your first car note with fond memories. That's why, here at Sport Chevrolet, we do everything we can to make financing as easy as possible. Allow us to make buying that new vehicle a smooth, easy process.