The great economic downturn that began in 2008 devastated a number of financial sectors, most notably the housing market. And for a long time, it seemed that this global recession might actually turn into a depression. But while things do remain difficult in certain corners, all signs point to a greatly improved economy. In fact, according to a spokesperson at GMAC, the economy is the best it has been since the recession started, and this translates into an attractive market for car buyers.
These days, auto interest rates have eased and are at record lows, and those with less than perfect credit are finding that they can receive financing. This is because there is increased competition among lenders, which makes this time period a “buyer’s market” in the auto sector. But there are things these buyers can do to ensure they secure the most attractive financing possible in order to drive off with that perfect new or used car. Here are just a few of these quick tips.
Do a once-a-year Credit Check
Before a person commits to buying a car, he or she should know where their credit stands. There are a number of online resources that offer credit checks – some for free, some for a price – but what’s most important is that the potential buyer knows his or her credit tier. Doing so can help them calculate with remarkable accuracy how much they are likely to pay in interest.
Those with credit scores of 680 and above can expect good deals. In fact, prime borrowers can expect to pay an average of $60 per month for a five-year loan on a new car and $348 for a four-year contract for a used vehicle. Conversely, subprime borrowers (those with a 619 credit rating and below) are going to want to come up with at least a 20% down payment in order to assure reasonable rates.
Set a Firm Budget
It’s important for the buyer to take stock of his or her finances as well as their credit, and then set their budget accordingly. A good rule of thumb is that car payments should never exceed 18% of a person’s take-home pay.
Get Loan Preapproval
Those who can get preapproved for a loan should do so. This is because it eliminates loan negotiations during the buying process. Those who are preapproved from a private lender also will have a better idea of how much they need to finance as well as the interest rate they should receive.
Make a considerable Down Payment
It was mentioned above that sub prime borrowers should make a minimum down payment of 20%. However, super prime borrowers would do well to follow this model also. The reason being that those with good credit can offset first-year depreciation costs this way.
Being that it’s still possible for interest rates to hike up, consumers in the market for a new vehicle should strike now, while the market is on their side. And the above tips should help allow them to save as much money as possible.
Joseph Francis is a professional blogger that provides information and advice on car title loans and title pawns. He writes for TitleMax, an auto title loan company with locations nationwide.