How to Borrow Money for a New Car

The prospect of owning a new car is often a mixed blessing for many owners. While a new car may save your wallet from high gas prices, you need to find a way to finance your car by combining loans and dispensable income. You can help yourself financially by finding the right way to borrow money for a new car.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Copy of your credit report
• Title for old vehicle

1. Determine the best course of action for your old vehicle before you borrow money for a new car. Try selling your vehicle before you use it as a trade-in to determine the demand for your car. Consult with your mechanic, as well as various appraisal programs online, to determine an estimated value.
2. Find out the difference between financing and leasing a new car. Financed vehicles require higher initial payments and longer financing terms, but they allow you full ownership at the end of the agreement. The lure of the lease is lower initial costs and decreased payments, but you will have to choose between a buyout and a new lease in the end.
3. Set personal limits for both the amount you want financed and the total amount of your new vehicle before you borrow money. You should not determine your new car purchase based solely on monthly payments to avoid overlooking long-term financial issues.
4. Research owner loyalty programs at local dealerships to find reasonable financial rates. You can usually get a favorable rate on money borrowed for a new car if you have owned a vehicle from the same manufacturer.
5. Consult with your bank to determine potential savings on auto loans. Many banks offer lower interest rates if you have multiple accounts as an incentive for your continued business. This option is ideal, because you can draw money from your bank account without filling out direct deposit forms.
6. Define the length of the loan through the dealership or private lender to modify monthly costs. The general rule is that there is a gradual increase in interest rates as you lengthen the repayment period for a loan.

Tips & Warnings

• Purchase updated credit reports before you apply for auto loans or financing. Banks and dealerships alike have access to your credit score to determine the interest rate applied to your loan. You can assess potential credit issues from identity theft or an excessive number of open counts before you head to the dealership.