Rising and falling interest rates are almost big stories in the automotive news world. When rates are low, it seems like a good time to buy a car. After all, you’ll be paying less to finance that car. Unfortunately, this “cheap money” often means that consumers overextend themselves. In fact, an analyst for the Royal Bank of Canada said that consumer debt has increased.
What’s a consumer to do?
If you’re smart, you’ll think twice about buying a car, whether it’s brand new or just new-to-you. By making good decisions based on your personal financial situation, you’ll stay in a stronger position.
Interest Rates Aren’t Everything
Don’t focus too much on automotive news. Low interest rates might mean that it’s a great time to buy a new car, but do you need one? It’s not smart to buy a new car simply because you can get a good deal. However, if your old car has been having more problems or no longer meets your needs, then you could jump at the opportunity to finance at low rates.
Find the Right Car for You
Lower interest rates might mean that you can afford a more expensive car, but you don’t have to do this. Don’t get blinded by the allure of a latest luxury features. Be rational about searching for a car. You want one that suits your needs while still offering good value.
Determine Affordability on Your Own
Banks have a formula to determine how much they’ll loan you to buy a new car. However, the bank’s calculations don’t always take your actual budget into account. In some cases, the amount the bank is willing to lend is far greater than the amount you’re really able to pay. Rather than relying on the bank to determine a loan amount, decide for yourself how much you can afford to spend on a car loan each month, then use a loan calculator to determine how much car you can afford. You want to be able to comfortably make your payments.
Always Compare Offers
Sometimes, people jump at a good offer before taking the time to determine whether it’s the best offer out there. For instance, if your bank mentions an all-time-low rate in the automotive news section of their monthly newsletter, you might want to take advantage of it. However, you should also compare your bank’s rate with those of other local banks. You may be able to get an even better deal somewhere else.
Make Your Payments On Time
When you do get a car loan, it’s extremely important to make your payments on time. This is key to increasing your credit score, which will help you continue to qualify for these low rates. Additionally, you have to remember that an auto loan uses your car as collateral. If you don’t pay the loan, the bank can repossess the car. If this happens, you’ll be out the car and all of the money you’ve spent so far. This is why it’s so important to only borrow as much as you can afford to pay.
Following automotive news is a good way to stay on top of the best deals, but it’s still important to take care of your finances. Be smart about borrowing money and you’ll always have good credit.