Do This Before You Buy A Car
There are a few things we recommend you do before you buy a car.
1. Check your credit report. Your credit score and your income will play a large part in what interest rate you can qualify for, for your loan.
Did you know you can actually get a free copy of your credit report every 12 months from annualcreditreport.com for you to review? I’ll put that in the show notes for you but once again that’s annual credit report dot com.
a. Check the report for errors.
i. Sometimes there can be a simple address error that needs to be corrected.
ii. Make sure all charges are your and dispute any that aren’t. Those may be as simple as sending a letter to the lender to clear it up.
iii. Clear up collections which are often things like unpaid medical bills.
iv. Clear up liens if you can. Liens are often for things like unpaid federal taxes or a judgment from an individual or creditor.
Handling Some of these things may raise your score but there are other things you can do as well to raise your score.
· Don’t take out any new lines of credit within about 6 months of when you wish to make your purchase so there are no hits on your credit
· Be sure you are Making your payments on time.
· Pay down any debt you can.
Bonus tip! If you have lines of credit that are open, but you don’t owe anything on them, DON’T CLOSE THEM!
This actually helps your score by showing you have credit available to you.
2. Check around for the best rate
a. There are several places you can actually get a loan but your credit union or bank will often have the best rates. See where your best option is… see what fits your needs best and just be aware of what deal you are getting.
3. Get a pre-approval once you’ve decided on the lender you wish to use. This can help things go more smoothly.
The lender will take a look at your information and give you an idea of how much you can qualify for and what the rate would be.
This isn’t an actual approval! But it gives you an idea of what you can shop for and how much you will be paying for a note.
a. A pre-approval will be good for about 30 days.
b. A lender will most likely ask you for about 1 months worth of pay stubs to complete the pre-approval.
4. Don’t deplete you accounts. This helps the lender see that what your average balance would look like to help them assess your financial habits.
5. Check your budget. Once you know what you CAN qualify for, see what will actually fit in your budget and make sure you can afford the note.
a. Be sure and factor in insurance premiums and upkeep on the vehicle in your numbers.
b. Don’t max our your budget. Leave room for changes in things like insurance premiums or gas prices.
6. Down payment.
a. This can be cash or trading in another vehicle. A dealer will often give you a certain amount for your old car that you can use towards the new one.
Now! You are ready to shop!
BONUS! Get quotes from your insurance agent for the different types of cars you are looking at. This will help you factor in those costs for budgeting.
Also look at things like tires and the type of oil it uses and other maintenance costs. These can vary widely in cost and will factor into your upkeep costs.
If you open the drivers door, there is usually sticker there that says the type and amount of oil… and look at the tires and make a note of the size and then just call around and see how much those things cost. It’s a great start.
Some cars just require a lot of tuning as well. So do research on any car before you purchase.
One last thing… Consider the longevity of the car if you need it to last you awhile. And how well it holds its value for later… after you’ve had it a few years and you want to trade it in or even sell it.
Some just hold their value better than others. Consider how important that is to you when you make a decision.
Did you know that many of these same things are needed for a mortgage?
Some of the differences are:
b. A mortgage will require pre-qualification vs just a pre-approval.
i. The lender will actually pull your credit and give you the parameters of the loan.
You will need a little more financial info
c. Your most recent tax return
d. Copies of bank statements for the previous 2 months
e. Pay stubs for 2 months
It’s a little more to consider and gather up for your lender but some of the ideas for shopping and getting ready are the same.
· Look around for a rate that’s right for you.
· Consider what kind of house really fits your needs along with the cost and upkeep.
· What fits your budget?
· Even considering how long it will serve your needs and the potential resale value is similar.
It truly is a similar thought process just on a bit larger scale.
Two things are definitely the same, once you have your loan, make sure to make your payments on time so that you can maintain your good credit standing that you’ve worked so hard for!
AND when you are ready to look for a car or a home, feel free to visit us at First Pioneers FCU and we can help you through the entire process!