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The Benefits of Pre-Approval before Car Shopping

When it comes to buying a car, as with anything, there’s a right way to do it and a wrong way to do it.

Doing it the wrong way can cost you thousands of unnecessary dollars. What are we talking about specifically? The number of years you finance your vehicle.

A recent report from says the share of Americans spending more than $1,000 on monthly car payments jumped to 17.9% in the fourth quarter of 2023, the most ever. While several factors explain why these figures continue to increase, one of them is where these car buyers choose to get their loans.

Where To Get Auto Financing

Instead of potentially being pressured to purchase a vehicle with high interest rates, it is suggested that you look for interest rates at your local Credit Union!

“Credit unions offer interest rates on car loans that can be 1% to 3% points lower than other lenders,” Clark Howard says. Read our guide on credit unions and their benefits. Another great place to check is with online lenders who don’t have the overhead of physical buildings to finance and spend on.

How Long Should the Max Auto Loan Length Be?

“The longest auto loan you should ever take out is 42 months,” Clark says. “If you can’t afford the payment on a 42-month loan, then you should buy a cheaper car.”

If you find that you can’t seem to get an auto loan under 42 months, it’s time to think about some options to reduce what the car costs.

What Are Some Ways To Get Lower Car Payments?

Clark also says to be especially careful about financing anything when the prices are inflated or when you’re already straining to pay your monthly bills.

  • Improve Your Credit

It’s no secret that you’ll be able to qualify for better loan terms the better your credit is. A good credit score typically gives you lower financing rates, which means you can pay less in interest when you finance your vehicle.

The minimum credit score needed to buy a car will get you into a vehicle, but your goal should be to get the best rates possible. Months before you buy a vehicle, see if you can boost your credit. Read our guide on how to improve your credit score.

  • Trade In Your Vehicle

One way to take a big chunk out of the total cost of a new or used car is to trade in your current vehicle. You can find out what your car is worth before you go to the dealer, which can arm you in any negotiations.

When pursuing a vehicle trade-in, there is one caution that Clark wants you to know about. “Never, never, never trade in a vehicle you still owe money on. Period,” Clark says. Several bad outcomes could potentially happen if you trade in a vehicle that you haven’t paid off. Read up on the pitfalls of trading in a financed vehicle.

  • Make a Bigger Down Payment

One thing you can do to keep your monthly payment reasonable, even in the short term, is to make a sizeable down payment when you buy your vehicle. The more money you pay upfront, the less you’ll pay in interest. It will also give you a better chance to owe less than your car is worth — even if it’s a new car that you drive off the lot (and it immediately goes down in value).

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