Now that you have decided to purchase a new vehicle, you're likely preparing to apply for an auto loan. Here are a few things that should be considered before doing so:
The Purchasing Timeline
When applying for an auto loan, take the time to ask the loan company how long the application process should take. Will you get approved or denied on the same day that you apply, or could it take a few days to hear back?
How long should you wait to call the company if you haven't heard back about the loan? If you don't know how long the process should take, you may end up waiting a lot longer than necessary due to a technical error because you didn't know when to check on the status of the loan.
It's also a good idea to ask your auto dealer how long it should take for the vehicle you purchase to be ready to drive off the lot once your loan has been approved. It may take a day or more for your vehicle to be ready after getting your loan approval and knowing what to expect beforehand will help ensure that you can prepare accordingly.
Extra Financial Protection
You can expect the vehicle you purchase to come with a manufacturer warranty of some kind. Be aware that the warranty will likely be a limited warranty that covers only manufacturer defects and major components that aren't likely to break down any time soon.
Even if the vehicle is brand new, the warranty that comes with it won't cover everything that could go wrong during the first several years of ownership. So ask the dealership you're buying the vehicle from whether any extended warranty options are available to you. Based on the year, make, and model of the car, you should be offered one or more options to choose from.
An extended warranty should provide you better coverage and more financial protection as the vehicle you buy ages. If you do decide to purchase an extended warranty, find out if the cost can be figured into the overall loan amount for the vehicle so you don't have to make two different payments.
Your Current Vehicle
Before applying for an auto loan, you should also consider the condition of your current vehicle and what you will do with it when you get the new one. If you trade it in for a new vehicle, you'll get a discount on the total purchase price of the vehicle, which should be reflected in the loan amount. Alternatively, you may choose to sell the car and use the profits to help pay for your new vehicle.
In this case, you'll need time to research the market value of your current car, determine who your target market it, and advertise the sale of the car before applying for an auto loan. And if you want to trade your current car in or sell it, it's a good idea to take it to a local shop and find out if there are any affordable repairs or upgrades you can make to achieve a higher sell or trade-in value.
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