If you need a new vehicle but feel intimidated by the cost, don't worry—there are several manageable ways to afford a new car payment. Cars don't last forever, and even if you're determined to drive your current one for years to come, it will eventually need replacing. Most people finance their car over 3 to 5 years, which can feel like an overwhelming additional expense. If you have no choice but to get a new car, here are seven things you can do to make it work for your budget.
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1. Improve Your Credit
Before you start shopping, try to improve your credit score. While it doesn't change the sticker price of the car, it has a massive impact on your interest rate. If you have excellent credit, you might qualify for significantly lower APRs, which saves you thousands over the life of the loan. Check out resources like AnnualCreditReport.com to see where you stand.
2. Shop Around for the Best Interest Rate
Don't just accept the financing offered at the dealership. Instead, shop around to ensure you get the lowest possible rate. You can secure your own financing through a bank or credit union, which often cuts out the middleman and results in better terms. As a rule of thumb, get at least two or three auto loan quotes before you sign anything.
3. Save for a Down Payment
If you can't pay cash, saving for a 10% to 20% down payment is the next best thing. A larger down payment reduces the total amount you need to finance, which directly results in a lower, more manageable monthly payment.
4. Settle for Less
It might be tempting to aim for a luxury vehicle, but if you want to keep your payments affordable, you may need to adjust your expectations. Prioritize a vehicle that is practical, fuel-efficient, and within your means. You can find more tips on setting a smart budget in our guide to how to create a realistic budget.
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2015-01-31T18:13:57.231Z