Tips for Financing a Used Car
After picking out a used vehicle and test driving it, we’re sure you’ll want to drive it home to Atlantic City or Egg Harbor as soon as possible. First, though, you’ll need to finance it.
Our team at Boardwalk Honda can help you out with this step, as we have some tips for financing a used car. Keep reading to see what they are, then contact us when you’re ready to get yourself a pre-owned automobile.
1. Know Your Credit History
Before you finance a pre-owned vehicle, it’s important to know your credit history. This is represented by a credit score, a 3-digit number that shows how likely you are to repay any kind of debt. A credit score can range from 300 to 850 and is calculated by how often you make payments on time and how many accounts you have that are in good standing.
You can always check your credit score online to see where you currently stand. If you want to raise your credit score up a bit, you can do one or more of the following...
- Keep any rotating balances down to less than 30% (like on a credit card).
- Try to make all your payments on time. If you do have any missed payments, you’ll want to get current and stay current on them.
- Avoid opening credit cards that you don’t need just to increase credit, which could actually backfire and result in a lower credit score.
By doing any of the above tips, you’ll have a better chance up raising your credit score. This could then help come time to finance a used car.
2. Keep the Loan Term as Short as Possible
The length of a car loan could be anywhere from 60 months to 84 months, with the average being 72. You may think it’s ideal to get a longer loan term to pay less each month. However, you actually want the opposite—with a 60-month loan term being ideal.
The shorter the loan term, the higher the monthly payments will be. It also means you’ll have lower interest rates, which is better for you in the long run.
The longer a car loan is, the more interest you’ll need to pay on it—on the interest rate itself and the finance charges over time. This means it could take longer to build equity on the vehicle. If you have negative equity, then you’d owe more on the car than what it’s worth. This could then affect you down the road if you ever want to sell or trade it in.
So, the shorter the term, the less interest you’ll have to pay and the faster you can build that equity.
3. Put as Much Money Down as You Can
When you go to buy a car, it’s recommended to put some money down initially—10% to 20% of the total cost of the vehicle.
The more money you have as a down payment, the more that gets taken off the initial loan. This will then lower your monthly payments, which can help you save more in the long run.
There are two ways to get that bigger down payment. You could save up some money by cutting down on any unnecessary extra expenses. However, you may have a car that you want to get rid of before getting a new ride. If that’s the case, then you use that vehicle as a trade-in, where the value will get used as a down payment.
Start Shopping for a Used Car Today!
By following the above tips, you’ll be one step closer to getting your ideal automobile. To get started on financing a used car, contact Boardwalk Honda. We’ll help you pay for a new-to-you vehicle and have you driving it around Atlantic City and Egg Harbor in no time!