Due to its cost, one of the favorite methods of getting a vehicle is to pay for it through financing; This process has several advantages and disadvantages that we must analyze before deciding on what type of financing and some other issues that we discuss later.
In addition, it is important to mention that in recent years they have been launched various programs to encourage the purchase of vehicles, or rather to take out of the market older cars, to be replaced by more recent and efficient models. An example of this type of plan is the PIVE (incentive plan for efficient vehicles), Plan that exists in an aid of 2 euros to be able to buy a new car that replaces one that is more than 12 years old.
Given all the economic and political circumstances, we must do a thorough analysis to determine the viability of financing a car, and to be able to do it in a better way, and much more agile, we have written this article with a series of tips that we can follow so that When financing our car we make good decisions and it is a pleasant experience, avoiding the risk of future complications.
We have to be realists
When you listen to the various proposals of the vendors, it is normal for us to get excited about one of the most modern and well-equipped cars or trucks; however, indulging in emotions rarely pays off. Therefore, it is highly recommended that we be realistic with the fact that our budget is limited.
So to avoid illusions when going to see the cars it is advisable that we have prepared a budget beforehand in which our limits are mentioned both for down payment and for the monthly payments and the deadlines to be met. this way it will be much easier to make the right decision regarding the best car for our needs and our budget.
A tip to make this budget is to take into account the monthly expenses, include in the calculations that part of our income goes to a reserve to later analyze how much of the remaining income we are willing to use to be able to liquidate the new car. If we put this advice into practice, we will undoubtedly avoid many disappointments and also many problems.
Analyze the various financing options
In the market we can find many options to finance our new car, broadly speaking we can mention only two institutions that have the option to finance a vehicle.
The first option we will mention is the dealer himself. In general, these are one of the methods that takes the most time, because for the credit to be authorized it is necessary for the dealer to investigate the buyer's profile, however, it is true that the process can also be facilitated because there is no need to attend the two institutions to carry out the paperwork, but just by going to the concessionaire it is possible to acquire the authorization. Another of the advantages of this type of financing is that there is a flexibility that will make paperwork negotiations easier.
On the other hand, we find banks, which are the financial institutions par excellence. Carrying out the procedure is much easier, especially if we have a bank account in that institution. If so, we must investigate the various options that the bank will make available to us.
Be prepared for financing offers
Once we know what financing options exist, it is important that we are ready to be able to negotiate the conditions and also to be able to analyze and make a financially correct decision. Specifically, we refer to being prepared knowing the interest rates that exist for financing.
Broadly speaking, we can mention 3, the first is the multicopy. East type of credit is offered by car manufacturers, And it could be considered a type of vehicle rental, since a monthly payment would be made; After the period agreed by the manufacturer and the user, it is possible to liquidate the car by paying an amount that will be defined according to the value of the vehicle and the size of the installments. However, there is also the option for the manufacturer to change the vehicle for a more recent one, on the condition that the agreed monthly amounts continue to be paid.
Other types of interest or loans that exist are the fixed interest, which implies that the buyer will always pay the same amount. The variable interest, in this interest rate the monthly payment can vary considerably, so we can win or lose. And finally we will mention the flexible interest, which has the characteristic of using a method that allows the dealer give away the first installment, as well as reducing the equivalent of the monthly payment, this only during the first year.
Learn how to use an amortization chart
In order to make better decisions, and to have a more accurate overview of all financing, it is important to make use of financing simulators, which can be specifically for car financing, or a loan simulator. In these simulators we will be given almost exactly the amounts of money that we will have to pay monthly in order to settle our debt.
Usually these simulators give us the option of being able to watch the depreciation evolution for as long as the financing is agreed upon. This will help us to be able to give us an idea of the amounts that are paid to capital, and the amounts that are paid to interest, based on this information we could even plan to be able to pay to capital in order to reduce interest and also to be able to pay off the debt in a faster way.
This brings us to another tip; and it is that since we met indebted to financing There are two amounts of money that we will have to pay, on the one hand, there is the so-called capital, which is the net amount that the institution financed us, that is, if 10 euros are financed, that is our capital or principal amount. On the other hand, we have the interest, which, continuing with the previous example, if it were 10% would be equivalent to a thousand euros. However, by paying directly to capital it will allow us to reduce the interest we will pay.
But before taking this action, it is important that we are well informed about the loan clauses regarding this matter, because while some institutions charge a fine for contributing capital, there are others that need to clarify that the payment goes directly to Capital, in case of not clarifying it, it may only be included as part of the payment for the following month, which would not change the amount of interest we would pay.
Consider other expenses
Mention was previously made of plan a budget so you can know how much money we can allocate for the payment and settlement of our debt. Now we are going to include a new variable, and that is that a car requires maintenance, cleaning, refueling, among some other expenses. So when making the budget it is advisable that these expenses be taken into consideration, so that when the time comes we can cover them, and also so that we can keep the car in optimal condition.
Be prepared for the paperwork
Up to this point we already advise investigating the types of institutions and the types of financing or interests that we can access; And once a decision has been made about which is the best option given our circumstances, it is important that we now have all the information about the requirements to be able to access this or that financing.
Having a list with the documents that we must have, and also with the steps to follow throughout the entire process, is extremely important to be able to guarantee that, during the process, the procedures do not stop due to lack of a document or a matter. Similary. So before we officially start the process, we must research this list so we can be prepared to carry out the process smoothly.
Read the entire financing agreement
Although, up to now, we may have already investigated a large amount of information, it is important that, when carrying out the formalities officially, the content of the contracts or documents that are signed is read very carefully. And if any doubt arises, it is advisable to question the person in charge of the process; in this way we can ensure that we fully understand the terms to which we are submitting. In addition to that we will have an even more specific and detailed panorama on what we must comply with.
Before we finish, we will give a piece of advice that was discussed a little at the time of starting this article, and that is that, although there are a series of economic support from the state, it is important that we investigate what opportunities exist, and in case our situation is the indicated one, it will be possible to access said governmental support that will help us to acquire a new car.