New Car Loan

According to some of the latest government statistics, a typical new car loan was over $30,000 in 2009.  That is a lot of money.  In fact, for many individuals, buying a new car is the second most expensive purchase they will ever make in their lives; only second to buying a home.  With that much money at stake, it makes sense to do some intensive research prior to finalizing a purchase decision.

Before you tackle the issue of a car loan, you'll first need to figure out which car will serve your needs best for the next couple of years.  So the first topic we'll discuss is how to research a car purchase.  Then we'll talk about paying for the car and the financing options available to you.  Finally, we'll show you some tools that can help you evaluate car loan offers.

What is the Right Car?

When thinking about buying a new car, the process you should go through has three distinct steps:  researching the car, figuring out how to pay for the car, and negotiating with the dealership.  How much time you want to spend on each step is up to you.  But each step deserves some research to make the new car purchase a more enjoyable experience over the long haul.

Class of Vehicle

When you are thinking about the new car you want to buy, you need to do your research before visiting any dealerships.  You need to first figure out the type of car you want to buy, then the options the car needs to have installed, and finally how much you can afford to spend on the new car.

Your first decision is what class of car to buy:  light truck, sports utility vehicle (SUV), minivan, luxury automobile, sedan, subcompact, or compact car.  To help make that decision, you should be asking yourself:

• Who is going to be driving the car, and where will they be driving the car?
• How many seats do you need, and how much cargo space do you need?
• Is the car going to be used for commuting to work?  If so, then is gas mileage or fuel efficiency an important factor?

Car Accessories

It's also important to make a wish list of car accessories you'd like to purchase such as air conditioning, stereo systems, power seats, power windows, and door locks.  Write down the accessories you want in a car, and take the note with you to the dealership.  Make sure the cars you test drive have all the features you're looking for installed.

Vehicle Safety

Don't forget to look for new car safety features such as antilock breaks, integrated seat belt systems, electronic stability control, day time running lights, and air bags.  Remember, a car must not only fit your functional needs, but also be safe to drive.

Affordable New Cars

The last part of your car research should include some time spent figuring out how much you can afford to spend on a new car:

• How large of a down payment can you afford?
• How long do you want to be paying off the new car?

In general, there are two rules of thumb you can apply when trying to figure out how much you can afford in a new car:

• Car Loan Payments - your monthly car loan payment should not be more than 20% of your disposable income.  That's the money you have left after paying for living expenses, mortgage payments, monthly bills, and credit card payments.
• Down Payments - you should be prepared to make a down payment of at least 10% of the car's purchase price.  If you don't make a down payment of this size, then lenders might be skeptical about your ability to pay off your car loan.

Car Loan Calculators

Keep in mind the purpose of buying a new car is for your personal enjoyment and / or that of your family. If you feel saddled with a new car loan, and it pulls too much money from the other pleasures in life, then it is defeating its purpose.

If you're not sure how much a car loan is going to cost you each month, then take a look at our car loan calculators.  We have nearly a dozen different types of car loan calculators that can help you figure out exactly how big a bite out of your family budget that new car is going to cost you.

More Car Loan Information

We also have several good articles that address the topic of automobile loans.  Our article on Car Loans speaks to at least five different options you have for financing your loan.  We even have an article dedicated just to the subject of Online Auto Loans.

The main points to be taken from these articles are that you have choices.  You can finance through a local bank, a credit union, the car dealership, a finance company and, of course, the Internet. Make sure you explore all of these options before negotiating at the dealership.  Don't fall prey to some of the financing tactics used by some of the less-than-reputable dealerships.

Negotiating with a Dealership

Information is powerful when negotiating a new car deal.  If you are able to narrow down your choice in new cars to two or three models, then this will allow you to walk away from a dealership and still have viable options.  If you've done your research on financing the car, then again, you have options if you don't like what you are hearing from the salesperson.

Information puts you on an even playing field when negotiating. The salesperson is an "expert" in the new car purchase process.  They do this every day, and their livelihood depends on it.  You might only buy a car once every couple of years; you're at a disadvantage because of that fact.

Whether you think you are smarter than the salesperson makes no difference because they are expert at negotiating a new car deal. When confronted with an informed consumer, a good salesperson will usually get right to the point, and not bother with any confusing sales tactics.

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