It’s essential to have your finances in place when shopping for a used vehicle. Set a price range for how much you’re willing to spend, and decide whether you’re looking to buy or lease a car.
Financing a vehicle
You have two main options when financing a car — you can borrow the money directly from a bank or apply for financing through a dealership. Both strategies have their advantages.
With direct financing, you know your credit terms, like your interest rate and loan terms, before shopping for a vehicle. Since you’re pre-approved to purchase the car, it’ll be easier for you to comparison shop among several different car dealers.
If you finance a car through the dealership, you’ll receive multiple financing options through the dealer’s lending network. You may even qualify for special incentive programs if you have a good credit score.
Applying for a loan or leasing a vehicle
When you apply for an auto loan, your lender will present you with a proposed annual percentage rate — the interest rate and fees for financing the loan. If you’re unhappy with your proposed APR, you can shop around and see what other lenders offer you.
Once you’ve found loan terms you’re happy with, you’ll close on the loan. Before closing, make sure you understand and agree to the written disclosures your lender provides you with. You can request that your lender send them to you in advance so you have time to review them.
If you prefer to lease a vehicle, you’ll make monthly payments for a predetermined period of time. Once the time is up, you’ll either buy out your lease or start over with a new car.
Similar to when you finance a vehicle, your lender may ask for a down payment and check your credit score when you apply for a lease. You’ll receive your leasing options, and if you agree to them, you’ll finalize the leasing agreement.
Getting auto insurance when buying a used car
You’ll need to purchase auto insurance after buying a used car — your state’s minimum liability coverage at the very least. If you take out a car loan, your lender may require you to purchase full coverage.
Fortunately, used cars typically cost less to insure than new cars, with an average insurance cost of $135 per month. But your age, credit score, and driving history all affect how much you pay for car insurance.
See More: 10 Best and Worst Car Insurance Comparison Sites