How to Budget for Your Next Used Vehicle Purchase and Other Keys to Used Car Financing
Date: Dec 30, 2022
Like everything else these days, buying a vehicle is getting more and more expensive. Not just when you look at the original sticker price, but also when you factor in all the hefty maintenance and gas costs. Therefore, it’s probably best if you focus on finding a used car that fits your needs so you can get a bit of a discount. And if you’re interested in getting the best deal possible, you should look for used car financing.
At Eagle Motorsport, we have decades of experience helping our clients navigate both calm and turbulent financial times at our dealership. Aside from offering an affordable range of quality vehicles, we also have an expert financial team that works hard to get you advantageous fiscal terms on your next vehicle purchase.
Why Buy A Used Car?
New cars always have a certain allure. It’s nice to know that you’re the first person in the new car and that nobody else has abused it in the past, even if the vehicle record is clean. That said, every single new car will come at a premium of at least a couple of thousand dollars. Once you drive it off the lot, it depreciates automatically.
Anyone buying a used car is doing so to get a good deal. But there’s usually a reason why you’re bargaining down. You need to be careful to remain within your budget and not get caught up in the hype of getting a new (used) car. Furthermore, you should ensure that you go to a dealer that treats their cars right. I.e., you want to check that they cleaned the interior and inspected it properly. Your car should come with some type of vehicle history reports like CarFax or AutoCheck to ensure that you know everything there is to know about its history. Make sure you go through it with a fine-tooth comb to evaluate things like collision history. Alongside history of theft, collision history will help you greatly in determining what purposes your future car was used for. Make sure that ownership has been transferred properly if you’re dealing with a private party.
How Do You Budget For A Used Car Purchase?
Financing is probably the most common way to acquire a new or used car these days. Financing describes the auto loans that people take out when they need to pay for a car – paying for a car entirely in cash is relatively uncommon.
Auto financing usually involves an initial down payment, one that the buyer can afford, then the rest of the money is provided by auto loan lenders, sometimes working for the dealership. They will need to pay the auto loan back over time including all the taxes, fees, and other add-ons.
Set A Budget And Stick To It
Sometimes, you’ll need to sacrifice all your ideal features and fancy gadgets to get the car at the price you need. You must enter the car buying process with a fixed number in mind that you can’t go over. And keep in mind that your used car purchase will account for taxes and will require monthly insurance and maintenance payments too, those numbers will vary depending on which type of car you decide to buy.
Having a tight budget is one of the first steps you can take toward narrowing down your used car options. At the beginning of your search, the number of choices might seem overwhelming, so it’s good to have a budget to stick to and help you focus. You’ll also avoid future disappointments when you start researching a car and realize you can’t afford it when you get to the dealership and start talking about financing.
Here are some tips we assembled for budgeting your next car purchase.
The Down Payment Impacts Your Monthly Payment: The more you pay upfront, the less you’ll need to pay every month. It’s pretty simple. You’ll have to weigh your options depending on your monthly income and the amount of savings you can dip into right now.
Align Your Car Payment With Your Savings: A general rule of thumb in financial circles is that you should save about 15% of your monthly income and set it aside for a car payment. So keep that in mind when you’re reviewing the details of your purchase.
Credit History Matters: Simply put, the more ambitious a car loan you need, the more you need to have a good credit history to back yourself up. Otherwise, you’re going to settle for less.
Know how much it costs to own the car: Everything from car maintenance, to filling up your gas tank to insurance payments must be in your head when you’re considering a prospective car. These will vary depending on how old the car is and also its make and model. Certain cars hold up to wear and tear better than others. Both mileage and age should be factors when you ask yourself how much a car could cost. Not to mention, taxes can have a big impact too.
Do Your Research: Researching your future car is a big part of the budgeting process. We already mentioned some of the potential tools you could use. However, you need to ensure that you understand more than just the cost. You must know how the car will function and how that compares to its competitors. That way, you’ll get a good sense of the value of the car. It makes no sense to simply pursue the cheapest car available on the market. Instead, you should find the features that you need the most and try to pack them in under your desired budget.
Put Your Needs First: When you’re planning the whole budget, you need to consider your finances not just as they are now – but as they might be in the future. How likely is it that you’ll get a promotion and earn more money? Perhaps you’ll switch jobs entirely? These are the types of things you need to think about when budgeting your monthly payments for the future. Of course, you don’t want to overextend yourself and spend more than you’ll have, but it’s still good to be realistic.
Consider A Trade-In: Trading in your old car for a new one is one of the best ways for you to save money. Once you plan your budget, you might want to try and get a low-end estimate of your current vehicle’s worth to see just how much room you might have to work with in the future. Most dealerships make it easy for you to get this number.
How Used Car Financing Works
Now that you understand how the used car budgeting process works, let’s look a bit more into how the actual financing will work for someone trying to obtain a car loan.
Simply put, when you finance a used car, you borrow money from a lender, which could be moderated by a dealership, bank, or credit union, to pay for the vehicle. You will agree to pay back the loan, plus interest, over a period of time.
After setting your budget, these are the typical steps to getting credit approval:
Shop for a used car
Get pre-approved for a loan
Negotiate the car price
Apply for a loan
Make Your Payments
Shopping For A Used Car
Of course, you might not yet be familiar with how the whole used car shopping process works, so we’ve decided to speed it up for you. There is a bit of a learning curve.
Write A List Of Needs And Dealbreakers
We already talked about considering your needs to prepare for budgeting, but you also need to consider your needs in the context of different cars. You need to distinguish between essential features and “nice-to-haves”. It’s the nice to haves that often pushes you over your budget, so be careful about what you incorporate on that list.
Comparing Prospective Cars
We believe that the best way to decide on which car to buy is to compare them side by side using a tool like the one on Cars.com. This will give you a sense of the main features of a car and how one might beat out the other. Particularly important might be gas mileage, which is interesting to look at side by side.
Reading Car Reviews
Another great way to evaluate a car is by looking for reviews on the internet and reading them. You should balance a mix of professional and amateur reviews to get a full picture of what a car offers.
Used Car Financing From Eagle Motorsport
Eagle Motorsport is a full-service car dealership that leads you step-by-step through the buying process so that you can afford the car of your dreams. On our lot in Hobart, Indiana, we have a healthy range of trucks, SUVs, minivans, and sedans.
From start to finish, our staff will handle inspection, and financing, and help you deal with the papers to buy a new car. We offer some of the most competitive financing terms in the area alongside friendly customer service and equal treatment. Just contact us to get pre-qualified for an auto loan and start searching our inventory for a car that matches your needs.
