How to Cruise into a New Vehicle in 8 Steps
Before you shift gears and buy a vehicle, read through these points so you're fully informed.
There are multiple factors to weigh before you sign the papers to buy a vehicle. We'll help you at every step, starting here.
What you want vs. what you need vs. what you can afford. Before purchasing a car, evaluate what you would like and what you need for a safe, reliable vehicle. Sure, the bells and whistles make your car fun, but are they worth the price tag? If you are purchasing your new ride with a loan, first make sure it will fit comfortably into your monthly budget. Be realistic and conservative when thinking about payment options as your financial situation could change at any time during the life of the loan. If you have to forgo saving to make the payment fit into your budget, you should think twice about getting the loan.
Understand your collateral responsibilities
A vehicle loan is what’s considered a “secured loan.” This means that your loan is less risky, as it is supported with a lien on your new vehicle. If you would default on the loan, your car could be repossessed. Once your loan is paid off, the lien is released and you have what is referred to as a “clean and clear” title.
When buying a new vehicle, be prepared to shop for cars AND rates!
As you do while shopping for a vehicle, do your research. You'll find CoVantage offers some of the lowest rates available. People with higher credit scores typically get lower interest rates. If your credit score is suffering, you may have a higher rate or need to have a higher down payment to get your funding.
You can get a pre-approval BEFORE you pick out a vehicle!
Pre-approval can save you time and prevent disappointment. By getting pre-approved, you gain a better idea of your spending power. Once you find the car that meets your needs, call your lender with the VIN, make, model, and special features to see if it meets your loan terms. Be prepared to put more money down if the vehicle, taxes, and fees cost more than what was approved in your application.
Pay a down payment, even if you don’t need it.
Depending on your credit history and other factors, you may not be required to provide a down payment. If that is your situation, it’s still best to put money down on the loan. This gives you the power to have a shorter loan term, smaller monthly payments, or both. Tip: Don’t completely empty your savings to make a larger down payment than needed. You may need that money further down the road for repairs, maintenance or general emergencies.
Research your vehicle’s worth before signing a purchasing contract.
This goes for both your old and new vehicles if you plan on trading at a dealership. Your car’s age, model, mileage, and wear can factor into the overall value. The best-case scenario would be that your purchase price is lower than the vehicle’s current value. Some modified vehicles with add-ons made by a previous owner may not increase the collateral’s value. If this is the case, you may need to put more money down if the purchase price is higher than the value.
Know your financial situation before you apply for a loan.
During your budgeting process mentioned above, analyze your income and know your length of employment. You may also be asked for pay stubs or W-2s depending on the loan amount or type. Check your credit history prior to applying so you know how your current credit picture looks. You may need a cosigner if your credit history has some room to grow. When asking family or friends to be a cosigner, know that the way you take care of your loan also impacts their credit history. By being your cosigner, their debt-to-income ratio changes, their score is impacted, and they are held liable for the loan if you default.
Be thorough when you read the loan paperwork.
If everything has been approved and the papers need to be signed, be vigilant. If there is something in your documents you don’t understand or agree with, say something BEFORE you sign. Once you sign, you are legally held liable for the loan amount. If you are interested in any form of loan insurance, try to ask before the loan documents are drawn.