If you’re like most borrowers, you might end up paying back far more than what your car is actually worth. Read on for 7 essential questions to consider before signing your next car loan.
How long do you usually own a car
The average number of years you own a car is going to affect your finances so keep the term in mind to see if you’ll owe money on a new car loan when you trade in your old car. For example, if you keep your cars for 5 years on average, and take out a loan for $20,000, a loan of 6 years or more would keep you in debt when you decide to trade in your car.
Are you getting a longer-term loan to get a more expensive car
On average, the loan amount for a 6-year loan is $25,300, a 7-year loan it’s $32,200, but for 5 years it is $20,000. This is why it’s always a good idea to be clear about your budget and to negotiate well on your previous vehicle beforehand to get the highest value for it.
How long do you usually own a car
The average number of years you own a car is going to affect your finances so keep the term in mind to see if you’ll owe money on a new car loan when you trade in your old car. For example, if you keep your cars for 5 years on average, and take out a loan for $20,000, a loan of 6 years or more would keep you in debt when you decide to trade in your car.
Are you getting a longer-term loan to get a more expensive car
On average, the loan amount for a 6-year loan is $25,300, a 7-year loan it’s $32,200, but for 5 years it is $20,000. This is why it’s always a good idea to be clear about your budget and to negotiate well on your previous vehicle beforehand to get the highest value for it.
Can you refinance at a lower rate
If your credit wasn’t that great when you purchased your vehicle, your interest rate might be higher than you expected. Cutting your interest rate would save you some money which could then be used to pay off the remaining loan faster. Sometimes taking a longer car loan qualifies you for a high-interest rate as the monthly payments would be too high on a shorter-term loan. But with a reduced rate of interest, you could save months of your payment amount while keeping your payments low.
Is buying a car now the best option
Financial decisions involve opportunity costs for what you could spend your money on. If your vehicle is working well, you could wait. But, if you have upcoming repairs or scheduled maintenance that could get pricey, this might be the time to trade it in. Add up your maintenance expenses and compare this amount to the cost of the new vehicle.
Financing a new car loan can be an expensive process. But with a little planning, you can save big and even get a better car.
