A new or used vehicle is probably one of the most expensive purchases you’ll make, with the exception of your home. Shopping for auto loans can be tricky - so before you sign any contracts, learn about the five B's of car shopping to help you make the right choice.
Budgeting for a new or used loan payment – and an adjusted car insurance bill – is an important step in the car shopping process. Make sure your goals and expenses are realistic so you can live comfortably within your budget – and sleep better at night.
The average consumer spends approximately 11% of their monthly gross (before tax) income on car loan payments. Many experts advise consumers to keep their car payment under 10% of their monthly gross income.1 When shopping for a new car, set a firm budget beforehand and stick to it.
If you own a vehicle, research its trade-in value and figure how much of that you expect to put toward the purchase of your new car. If you're trading in your beloved beater for a brand new set of wheels, you may see an increase in your insurance rates. Make sure you factor that into your car shopping budget, too. These variables may also play a part in how much you can put down as your deposit and how much you can comfortably afford on a monthly basis.
Consider how much room for baggage you’ll need before settling on a specific car. Make sure your car fits your lifestyle.
Also think about the future. For example, if you don’t have children but think you may start a family in the next few years, then consider a vehicle with extra seating and storage space. This is also a good time to consider whether you’ll ever need to tow a boat, motorcycle or camper. While you may not own this recreational equipment now, you may in the future.
Above all, choose a car that fits your lifestyle and your passengers.
3. Buy or lease?
Once you determine your budget and space needs, the next step is to decide whether to buy or lease your next vehicle.
One advantage to buying a car is more negotiating power, since dealerships often award higher commissions to new sales than lease agreements. Another advantage is lower insurance premiums. Most importantly, once you've finished making your new or used auto loan payments, you’ll own the vehicle free and clear.
Not only should you look for a bargain when car shopping, you should also be prepared to negotiate. To get the best deal, do your homework and be sure to understand what a reasonable price is before making an offer.
If you're looking into a used car, refer to Kelley Blue Book and other online resources for car values to help you negotiate a fair price. Negotiating is about compromise, so be willing to give a little too as long as you’re within your budget. Decide beforehand what you can and can’t live without. Can you give up a moon roof if it means you get an iPod hookup?
Finding the financing you need to pay for your next car purchase doesn't have to be daunting. It’s important to find a lender that can help you pay less interest on the money you borrow.
Nationwide Bank® offers flexible new auto loans and used auto loans to help you get on the road in no time. We also offer great auto refinance rates if you decide to stick with the car you already have.