Which Comes First: Financing or Finding Your Dream Car?

Be ready to purchase your dream car when you find it and be able to afford it by following these crucial steps.


A new car—and even a new-to-you car—is an exciting purchase! But before you dash off to the nearest dealership with your list of vehicle must-haves, learn how getting financing first is the smartest way to find your new ride.


First, apply to multiple lenders to find the best deal on loan interest rates, promotions, and loan terms. Ideally, you should work within your personal budget to decide how big of a monthly car payment you can afford. Lenders you might apply to include your bank, local credit unions (who traditionally have the lowest car loan interest rates), dealerships, and various online lenders.

Second, learn about the pros and cons of leasing a new car, buying a new car, or buying a previously owned car within your budget. Leasing a car is like renting it from the dealership. They will take care of maintenance costs under warranty, you get to drive a new car with a low or no down payment, and at the end of the lease you simply drop the car off at the dealership—no hassle of trading it in or selling it.


On the flipside, there are mile restrictions (with a penalty if you go over that mileage), leasing costs more than an equivalent loan because you are driving a rapidly depreciating car, if you lease one car after another the monthly payments continue but you never own a car outright without payments (which is when you can get the most value out of a car), ending a lease early could cost you thousands, and you must return the car in good condition or be charged for excess wear and tear.


Third, start looking at cars! Search new car dealerships, independent dealerships, used car retailers, and private sellers in your area. You can even browse and purchase online at sites like Autotrader, CarMax, TrueCar, AutoTempest, and Cars.com. Throughout the process, be firm about your car budget. There are good deals to be found out there, but it’s only a deal if you stay true to your budget and can afford the monthly payments.


Know that dangers lurk in getting financing from used car retailers themselves and not from a financial institution like a credit union or bank. Car retailers make lots of promises about getting you in a car without a credit check and without any money down, but their financial practices are not regulated and they often sell cars to buyers who can’t afford the payments knowing they will default on payments. The car seller can then repossess the car and re-sell it. They also charge higher interest rates with brutal consequences for late payments.


The smart car shopper knows what they can afford before touring the car lots. Find a local credit union to start the process of loan qualification.

There’s a car out there for you within your budget—know your financing options and then find your new set of wheels!

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