Car Buying 101

Updated: Mar 2, 2019

If they have researched the perfect car to buy and the perfect time to buy it. But have they checked their report and score? A quick review of their report online before they visit dealerships can save them both time and money when they are ready to make a deal.

Here is 3 steps that your friends need to follow to make sure that they are ready to purchase with the lowest interest rate possible.

1. Give that report a tune-up.

Check their credit report early in the process to avoid embarrassing or costly episodes at the loan desk.

• Get the facts first. Having your 3-in-1 report from before they shop for a vehicle allows you to compare and review their financial information from each of the three credit bureaus: TransUnion, Equifax and Experian.

• Check the accuracy of your 3-in-1 report. If you find any mistakes, report them immediately.

• Are credit card balances high? Reducing these or paying off small debts can sometimes boost your credit score and save you money on a loan.

• A few months of prompt bill payments can improve the way lenders view you.

2. Don't overextend credit.

Brand new sports car vs. used and practical? Before they decide which car is right for them, it's a good idea to see how much they can really afford.

• After all other bills are paid each month, how much do you have left to put toward a vehicle?

• Do you have a trade-in or down payment? These can help you negotiate a better rate with lenders and can be especially important if you have problem credit.

• Calculate your debt-to-income ratio by dividing all your monthly payments by your gross monthly income. Make sure to add in your expected new car payment. A ratio greater than 30 percent may be a red flag to lenders.

3. Do your financing homework.

Applying for an auto loan doesn't have to be stressful if you arrive prepared. Consider the following:

• Be ready to discuss your income, occupation, home loan and credit history.

• To negotiate the best loan, check the rates banks and credit unions will offer you before visiting a showroom to make your final deal.

With these tips and credit report from in hand, they should be well-equipped to negotiate a better deal on your next car.

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