What to Know Before Financing Your Next Car

Buying a new car can be exciting.

Maybe your current vehicle has seen better days. Maybe your family needs more space. Or maybe you're simply ready for something newer, more reliable, or better suited for where life is taking you.

Whatever brings you to the dealership, choosing the vehicle is only part of the decision. How you finance it can have just as much of an impact on your budget long after you drive off the lot.

Before you start shopping, taking a little time to understand your financing options can help you feel more confident about your purchase and make sure your next vehicle fits comfortably into your financial life.

Here are a few things to keep in mind before financing your next car.

Start with Your Budget, Not the Car

It's easy to fall in love with a vehicle first and figure out the numbers later.

Instead, start by determining what you can realistically afford before you shop. Think about how a new car payment will fit alongside your existing monthly expenses and financial goals.

And remember, the cost of owning a vehicle goes beyond the monthly loan payment. Your budget may also need room for:

• Auto insurance
• Gas
• Routine maintenance
• Repairs
• Registration and other fees
• Parking or commuting expenses

Looking at the complete picture can give you a much better idea of what price range makes sense for you.

Look Beyond the Monthly Payment

A lower monthly payment can sound appealing, but it doesn't always mean you're getting the best deal.

Your loan amount, interest rate, and repayment term all play a role in determining both your monthly payment and how much you'll ultimately pay for the vehicle.

For example, extending your loan over a longer period may lower your monthly payment, but it can also mean paying more interest over the life of the loan.

Before making a decision, look at the entire loan, not just the monthly number. The goal is to find financing that works for your budget today without losing sight of the long-term cost.

Know What APR Means

When comparing auto financing options, you'll likely see the term APR.

APR stands for Annual Percentage Rate and represents the cost of borrowing money expressed as a yearly rate. Understanding APR can make it easier to compare financing options and see how the cost of borrowing may affect your overall purchase.

Your actual rate can depend on several factors, including your credit history, the loan term, and the vehicle you're financing.

If the numbers feel overwhelming, ask questions. A good lender should be willing to walk you through your options and help you understand what you're agreeing to before you sign.

Consider Financing Before You Shop

You don't necessarily have to wait until you're sitting at the dealership to think about financing.

Talking with your credit union before you start shopping can help you understand what financing options may be available and give you a clearer idea of your budget.

That knowledge can make the shopping process feel a lot less stressful. Instead of trying to figure out the vehicle and the financing at the same time, you can walk in with a better understanding of what works for you.

Don't Forget About Your Current Auto Loan

Already have a vehicle loan? It may still be worth reviewing your financing.

If your current auto loan is with another financial institution, refinancing could be an option depending on your current rate, remaining term, credit, and financial goals.

Refinancing isn't automatically the right choice for everyone, so look at the full picture before making a change. Compare your existing loan with the new option and consider both the monthly payment and total cost.

Sometimes simply reviewing what you have can help you determine whether you're still in the best situation for your budget.

Ask Questions Before You Sign

You should feel comfortable with your auto loan before you drive away.

Before signing, make sure you understand:

• Your interest rate and APR
• Your monthly payment
• The length of the loan
• The total amount you're financing
• Whether there are additional fees
• When your first payment is due
• Your payment options

If there's something you don't understand, ask. Financing a vehicle is a big financial decision, and you deserve to know exactly what you're signing.

Make Your Next Move with Confidence

Your next vehicle should fit more than your lifestyle. It should fit your budget, too.

Taking the time to plan ahead, understand your financing, and consider the total cost of owning a vehicle can help you make a decision you feel good about long after the new-car excitement wears off.

At Lakeshore Federal Credit Union, we're here to help make that process a little easier. Whether you're purchasing a car, truck, van, or motorcycle from a dealership or private seller, our team can walk you through your financing options and help you find a loan that fits your budget.

Already have an auto loan somewhere else? We can help you explore refinancing options, too.

Before you hit the road in your next vehicle, talk with the team at Lakeshore Federal Credit Union. We're here to help you finance with confidence.
 

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