4 Financing Tips for Stress-Free Online Car Buying
Americans buy more and more things online, and cars are no exception. If you’re considering buying your next vehicle online, these tips can help.
Online car buying has grown tremendously in recent years as consumers seek transparent, convenient and hassle-free purchasing experiences. According to Cox Automotive’s recent Car Buyer Journey Study, more than 80% of shoppers believed that the car buying experience was improved by online activities overall. Additionally, from a cost-savings perspective, the Study revealed that 78% of car shoppers believe an e-commerce approach provides greater pricing transparency.
April is National Financial Literacy Month, an annual observance dedicated to promoting financial education and an opportune time to seek ways to make smarter financial decisions. A great place to start is when purchasing your next vehicle – one of the biggest purchases you’ll make next to a house. With car pricing and interest rates on the rise, every penny counts.
In the spirit of saving and making sound financial decisions this month, I’ve compiled four financial tips below to ensure your next car-buying experience is stress-free.
Know Your Credit Score
Buying a car isn’t like getting a mortgage – you can be approved for a car loan even with bad credit. The problem is that bad credit will drive up your interest rate. Many dealerships and car companies claim to offer low-interest rates, but they only apply to customers with high credit scores. A solid credit score can lower your monthly payment, leaving more room in your budget for other priorities.
Be wary—while some dealers perform a soft credit check at no impact to a customer’s credit score, others may not. Make sure you know where your credit stands before committing to a purchase. Here are a few free resources for checking your credit score to know exactly where you stand.
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Get Financing Quotes
Don’t settle on one dealership or company before exploring all of your financing options. Many online auto retailers have quick and easy ways for customers to get a quote by inputting their information online. Compare terms and interest rates to find the best deal before choosing where to purchase.
Furthermore, exploring one’s options with the help of a co-signer may help unlock more attractive financing terms, and best of all, now many lenders offer remote co-signing options, so that online car shoppers can team up with a co-signer even if they aren’t in the same physical location.
Sign Up for Autopay
Many lenders offer lower interest rates to customers who sign up to make payments using autopay. In addition to potentially locking in a lower payment with your interest savings, autopay saves time and helps you avoid the hassle of mailing checks or logging in to make a payment.
As a bonus, autopay helps ensure every payment is on time, preventing you from paying late fees. Autopay can even help you build a history of on-time payments and boost your credit score. However, be careful about how much you spend each month, and make sure you have enough money in your account to cover your auto payments to avoid overdrawing your account.
Put A Little Extra Down
If you have some savings stashed away, it’s a great idea to put a little extra cash towards your vehicle’s down payment, even if you qualify for $0 down. Lenders view customers investing cash in their new ride upfront as a positive sign that the car will be well taken care of and that payments will be made on time.
Customers who put a little extra down are often rewarded with a lower interest rate. More money down means a smaller loan with lower payments. Lastly, as the value of your car depreciates, a larger down payment protects against greater financial loss because the equity acts as a buffer. Since you own more of your car from the time of purchase with a higher down payment, you are less likely to get stuck paying for a loan that costs more than you could sell your car for down the road.
Handy online tools like this auto loan calculator can help clarify the process before committing to a major financial undertaking.
As of March 2023, the current average car loan interest rate for used cars is more than 10%, according to Experian. Careful spending is more important than ever. I hope these tips are helpful as you finance your vehicle and buy online.
Disclaimer: We hope you found this post helpful! We do our best to only provide accurate information, but please conduct your own research before transacting and consider talking to a qualified professional about your unique circumstances.
Reviewed April 2023
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