How Will You Finance Your Next Honda?
You’ve found your perfect car, but you don’t have the cash on hand to pay for it. It happens.
So, where will you go to get the best deal on financing for your new or used Honda vehicle? Is it the credit union, your bank, or the dealership? There is no one answer that fits all situations, but there are things you’ll want to consider before making the decision.
Keep in mind that the purchase is about more than the monthly payment. Your primary focus may be what it costs each month but consider the overall price of the vehicle instead of just fixating on the monthly payment.
Often, buyers opt for longer finance periods because they’ll have lower monthly payments, but you need to consider the amount you’ll pay over the long haul. You’ll want to make sure at the end of the financing period, you still have a car to drive or trade-in.
Don’t forget to consider the costs of maintenance and insurance because these can vary depending on the car you choose. All these factors go into the overall cost of ownership and should be considered.
Create a car budget
Be an informed auto shopper. Don’t get ahead of yourself. Do some calculations and make an informed decision. Set a budget. Don’t let yourself buy something you can’t really afford.
With your budget in mind, you can avoid overpaying and getting yourself into financial trouble. Start by understanding what you can afford, monthly and over the life of the loan.
The first step is to determine your reliable income and expenses. Base your income on what you take home (after taxes) and not your gross pay.
The next step is to take an honest assessment of what you can afford and are comfortable spending on a new vehicle. Remember, there may be other priorities and future expenses you need to account for. A rule of thumb is that you shouldn’t spend more than 15% of your monthly income on your car loan payments.
Another aspect to consider is how much you can put down as a down payment. Typically, the more you can put down, the better. It will cost you less in the long run because you’ll get a better interest rate and have fewer payments over the life of the loan.
If you have top-notch credit, you may qualify for some dealer “0% down” offers. However, be informed because these often come with trade-offs.
Know your credit score
To be a prepared buyer, you need to know your credit score. According to Bankrate.com, borrowers with a credit score between 781 and 850 get an average annual percentage rate of 2.6% on their new-car loan. For used cars, they can expect an average rate of 3.4%.
As you might expect, with a lower credit score you get a higher percentage rate. The average buyer with a 661 to 780 credit score can expect a rate around 3.59% on a new-car loan. That average rate increases to 6.39% with a 601 to 660 credit score, and to 13.53% with a 300 to 500 credit score.
Once you know your budget and credit score, you’re ready to find your loan options. Get a pre-approved letter from your personal bank if you can. You might be able to get a better deal from the dealership’s finance and insurance office than from the bank, but having the letter may help expedite things.
Closing the deal
Armed with all this information, you should be ready to close the deal. And, you should know our finance department has the experience and expertise to help find the right financing solution for you.
We work with people from all over the region to ensure our customers find the right financing option at the most competitive rate. Working with the knowledge you’ve gained, you can use our payment calculator to estimate your buying power and monthly payments.
If your credit isn’t at the top of the pile, we can help find the something to fit within a budget that will make you a happy owner.
Think the “Buy Here Pay Here” lots in Virginia are your only option? Our finance professionals have relationships with banks in Maryland and Virginia and that can provide you rates more competitive than those dealers. Fill out our online credit application and let our loan professionals arrange to finance for your next vehicle. Call us today at 866-826-5987.