If you feel that your car has had its day and no longer meets your needs or if you want to drive a more modern vehicle, you should consider buying a new car. Like the acquisition of a house, the purchase of a vehicle is a project that you must prepare well. Indeed, whether you are looking for a used or new car, the budget to be expected can be high. Here’s how to finance the purchase of your new car.
Decide on the type of car you want and research the prices
To successfully purchase your car, we advise you to proceed in stages. First, you need to identify the type of vehicle you need. Indeed, without having a precise idea of a model and the car brand you need, it will be difficult for you to know the budget to plan and therefore the necessary financing. When deciding on the type of car, consider your needs. For your daily commute, a 4-seater sedan might meet your expectations, but if you’re looking for more space, the station wagon is recommended. You can also opt for a 4×4, if you want a more imposing car, or a coupe car, if you prefer a sporty model.
Then decide whether you want a new or used vehicle. However, keep in mind that a new car will be more expensive than a used model. Anyway, thanks to a loan to buy a used or new car, you can easily realize your project. Among the selection criteria when buying a car, also features the mark. If your wish is to realize your childhood dream by buying a Porsche, do not hesitate to choose one of the models offered by certain dealers. In addition, also take into account the choice of fuel and engine to decide. Finally, find out the price of the vehicle you are looking for.
Determine your borrowing capacity to choose your car
Now that you have an idea of the budget needed to buy your car, you need to calculate your borrowing capacity. This corresponds to the amount that you are able to borrow with regard to your income and your expenses. To set the borrowing capacity of an individual, banking institutions therefore take into account these two factors (income and expenses). Income includes several elements, including salary, pension, rental income, etc. As for fixed charges, they concern monthly loan payments, alimony, rent, etc. Finally, you will also have to consider your personal contribution.
The borrowing capacity estimated as a percentage is calculated as follows: cost of fixed charges divided by the total amount of income, the result multiplied by 100. Knowing your borrowing capacity before going to a bank increases your chances ofget a loan. If you have trouble determining your borrowing capacity, do not hesitate to use an online simulator. Very practical, the tool allows you to have an estimate in a few minutes. So find an online simulator and then fill in the necessary information to get a result.
Compare the APRs of several lenders before buying your car
Lending institutions offer different terms and interest rates. To find an offer that benefits you, you must necessarily take into account the APR (annual percentage rate). This rate represents the actual cost of your car loan and takes into account several elements, including interest, processing fees and insurance contributions. The idea is to choose the offer whose APR is the most affordable. The rate varies according to several factors:
- the amount you wish to borrow for the purchase of your car,
- your bank’s pricing policy,
- your profile (your level of guarantees, your professional situation, your age, etc.),
- the repayment period.
If your repayment term is short, the credit rate will be affordable. Otherwise, it will be high. This is because a long repayment term involves higher risks. Finally, there is the possibility of benefiting from a 0-rate loan, but certain conditions must be met. In fact, banks rarely offer this type of offer and this concerns only one limited number of cars. It is usually an agreement between certain dealers and banks to facilitate the sale of certain car models. Comparing several loan rates will allow you to find an interesting offer. For this purpose, do not hesitate to use an online comparator.
New car or a used model: the difference in loans
In addition to being less expensive, some used vehicles perfectly meet the needs of users. Indeed, used cars with low mileage are generally in very good condition and suitable for most budgets. However, although the price is more affordable than that of a new car, you may needa car loan to buy it.
The main difference between a loan for a new car and a loan for a used model is interest rate level. Indeed, the interest rate for a new vehicle is more advantageous than that applied for a used car.
Choose a lender and sign the loan agreement
Loan offers vary from institution to institution. To be sure to take advantage of the best offer, look at certain criteria starting with the cost. If certain financial structures charge filing fees and impose guarantees, other establishments remain flexible on these points. By contacting this type of organization, you will certainly be able to benefit from a more attractive price.
Also take into account the monthly payments without forgetting the interest rate. Whether you are looking for a new or used car, choose a lender whose interest rate is more favorable to you. After choosing a lender, you can sign your contract. In general, the requested sum is made available to you in the following days, so you can order your car as soon as possible.