So, you want to purchase a brand new vehicle. Unless you have the money saved up, you'll need a new car loan to get the ride you've been looking for. The details of getting a new auto loan and a used auto loan are similar; however, there are some differences to consider.
New auto loans are generally for a higher amount; however, they come with a warranty that will likely last through the duration of the loan. They also tend to allow for lower interest rates and other special financing offers.
Keep reading to learn about the process of getting a new auto loan, so you're well informed when it's your turn to secure auto financing.
Check Your Credit Report
Before you apply for a new auto loan, you want to check your credit report. Your credit history will greatly impact details related to your loan, including your interest rate, monthly payment, and if you'll even qualify for a new car loan at all.
Review your credit report to see if you have negative remarks, delinquent accounts, or anything else that is keeping your credit score from being higher. If you can make the changes to improve your score before applying, do that so you can qualify for the best auto loan terms.
This might mean that you delay applying for your auto loan while you work to increase your credit score, but it will be well worth it in the end.
Apply For Your New Car Loan
Once you review your credit report and make any necessary improvements, it's time to apply for your auto loan. This can be done in person at your local bank, credit union, or car dealership. It can also be completed online.
When you decide where to apply for your new auto loan, you will realize there are pros and cons of each option.
Dealerships can sometimes offer exclusive deals for financing, and banks may be larger with more people on hand to support you through the process.
However, credit unions overall tend to stand out as one of the best options for getting an auto loan. Not only do credit unions offer lower rates across the board, but they are also known for providing excellent customer service to their members.
You will need to provide all of your basic identifying information along with details regarding your employment and income. The auto loan provider will run your credit report to decide your loan worthiness and terms you qualify for.
When applying for an auto loan, you want to complete all applications within 14 days. Otherwise, your credit will take a hit for making too many inquiries in a short period.
Get Pre-Approval
You want to get a loan pre-approval if possible. The pre-approval does not determine that you will secure your loan for sure. Instead, it indicates that you have a high likelihood of qualifying for a loan. You will still need to finalize your loan before receiving your funds.
Your pre-approval letter is enough for car dealers to take you seriously when you go to the dealership. It allows you to have all of the details upfront regarding your terms, the maximum amount you can finance, etc.
Shop For Your New Car
Now that you know how much car you can afford, you can start looking for your car.
Make a list of your must-haves and compare options until you find a vehicle that fits your budget and style while having the features you desire.
You can start by looking for new cars online via sites like AutoTrader.com or visit a local dealership’s website for available inventory.
When you find the car you like, take it on a test drive to be sure it's the car for you.
With a pre-approval in hand, you can focus primarily on securing the best deal for your vehicle, without having to negotiate financing.
Finalize Your New Auto Loan
Now that you've chosen the vehicle you want and negotiated a price that works for you, it's time to finalize your new car loan. Reach out to the financial institution that pre-approved your car loan to give them the final price of the car.
Make Your New Car Loan Payments
Congratulations on securing your new auto loan and buying a new car!
Now, the only thing left to do is take it home and start making payments. You will likely receive a coupon book for mailing in your payments. While you can submit payments in person, via phone or mail, many people prefer the convenience of doing so online.
You must make your payments on time, so it doesn't negatively impact your credit score. Also, be sure to confirm whether you have an early payment penalty. An early payment penalty is a fee you have to pay if you pay off your loan in advance of the term in your contract.
Are You Ready To Get A New Auto Loan?
Once you decide to secure a new car loan, the process from the first to the last step can take about a week or less as long as you're financially prepared for approval.
Arbor Financial Credit Union offers both used auto and new auto loans to suit your car financing needs. Let us help walk you through the vehicle loan process.
