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HOW MUCH USED CAR CAN YOU AFFORD

A sense of responsibility carries a used-car buyer a long way toward a sensible purchase.

The prospect of a owning your own vehicle is an empowering, exciting thing. It’s so exciting, that it’s easy to lose sight of important financial situations and just gravitate right toward something that’s simply aesthetically pleasing or even has all the performance bullet points checked off. The fact remains that you’ll be absorbing a sizable financial responsibility with long-term ramifications for your credit history.

With the right planning before setting off for the dealership, you can shop in comfort knowing exactly what you can drive comfortably knowing that the note won’t break your bank. What’s more, a good sense for your budget makes shopping easier. Vehicles that are attractive but beyond your pre-determined price range suddenly become that much easier to pass up as you zero in on something that suits both your tastes and your spending threshold.

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THE KEYS TO GOOD FINANCING

Generally speaking, lenders will take four major factors into account when deciding first whether or not you’ll receive approved financing, and if you quality, how much they can offer you. Keep in mind, it’s somewhat of a sliding scale. Sterling marks in one area can sometimes offset dents and dings elsewhere. Don’t assume that one flaw automatically rules out anything except a cash-up-front purchase.

* CREDIT

More than looking simply at your score, lenders will also consider whether you have a history of on-time payments and a manageable debt load. Again, one consideration sometimes balances out another.

* INCOME

Lenders will check into not only how much you make per month and annually, but how steady your employment has been and whether additional ongoing monthly expenses could likely hinder your ability to keep up on payments.

* THE VEHICLE

In all likelihood, the interest rate offered will probably be lower for a new car than a used ones, to balance out the used car likely having a lower price and hence a lower number of payments on which the lender can collect interest. Rates may also differ from vehicle to vehicle based on type, such as for a motorcycle versus a used pickup truck.

* TERMS

See the bigger picture: that long-term loan’s lower monthly payment may look enticing on paper, but you may end up paying more interest over the entire repayment term, even with the same interest rate offered for, say, a 36-month loan as a 60-month term.

Most notably where it concerns iffy credit, examine your options. Always shop at least four or five lenders before selecting a loan. The bigger the net you cast, the more likely you become to catch an offer with solutions for damaged credit. Many lenders become increasingly open to extending a loan if the borrower brings in a qualified co-signor to guarantee repayment.

 

DON’T SIGN YET!

Whatever the offer, look a few things over before you sign off. Remember, these loan terms may impact your financial stability for years to come…

  • Have you confirmed your annual percentage rate (APR) and whether the loan is a fixed or adjustable-rate offer, complete with some number-crunching to verify that it’s an offer you can afford to take?
  • Does the loan amount in the documents match up with the discussed offer?
  • Can you comfortably afford the payments on your current income?
  • Do you face a penalty if you repay the loan early?
  • Any additional hidden charges?

One last thing: take into account the costs that don’t necessarily show up on the sticker. Think about the car’s gas mileage in comparison to your driving habits. You’ll also be on the hook for registration fees, insurance and possibly sales tax. Last, but not least, remember that if you haven’t chosen a make and model with a reliable reputation, you could be setting yourself up for costly maintenance fees.

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