Buying a car is a dream for everyone. But with prices going up. It is becoming difficult for everyone to have enough money stashed away for the down payment on the car.

In the excitement of buying a car, you can make a few mistakes that amount to financial problems down the line. Just having a down payment for a car is not enough to be sure about on-time payments.

You are to pay down interest on top of the loan you take out. Your budget must have wiggle room to cover these additional expenses unless the settlement is.

Direct lenders and car dealers can help you access different types of financing. But the onus is on you to decide which one suits your current financial situation.

“Leveraging good relationships with your dealer or bank is one way to get an auto loan at a lower interest rate.” Not to mention, a good credit score and strong repaying capacity will also count.

Nonetheless, you may find it a bit complex for you to buy a car. Well, do not lose hope. You still have a lot to do to come through an affordable car deal.

Define your budget

Experts recommend that you should have enough cash to cover all your expenses – with money spare to make car payments. Surveys have reported that car payments make up 35% of your monthly budget, while it should not be more than 20%. You are aced out if it accounts for only 15% of your total monthly spending.

“Do some homework to get an idea of how much it will cost you.” Online calculators will let you gain an insight into the estimated cost. As the actual cost will vary, make sure you leave some room for additional payment.

If you are taking out a joint car loan, plan around the budget of your partner as well. Do not forget to add other expenses like maintenance, insurance and parking into the bargain. Calculators do not include these expenses to give details of the estimated cost.

Think twice before buying a new car

New cars are expensive, no doubt. “If you have a considerable size of income, you do not need to worry.” However, when your budget is flimsy, you should think hundreds of times before buying a new car. High prices will lead to increased loan-to-value. “As you will pay down the debt over a period of time, interest will keep accruing.”

Even though you get a car loan in Ireland at the best interest rates, it will be expensive compared to deals available for secondhand cars. The reason is conspicuous that used cars are more affordable than new cars, and therefore, you will end up paying less money in interest.

Compare prices of secondhand models and their physical condition as well. Look at the mileage to make the most of the money. Secondhand cars can be available at car dealers, but you can directly buy them from a private vendor.

You can turn to online lenders to fund the cost of the car. Unlike car dealers, private lenders will not provide hire purchases and personal contract purchases. They offer a personal loan in Ireland. These loans do not require additional collateral, hence called personal loans. “Your car, however, will be served as collateral, but you can use it the way you want it.” Unless you settle the loan, you will not be able to sell it.

Think over trade-in

It has become a trend to trade in your old car as you do not want to get into the hassle of finding someone to buy your car, but car dealers purchase it at a discounted price, keeping room to make their profits. “Therefore, you should avoid selling your old car to a car dealer.”

It is recommended that you sell your car privately. Of course, it involves putting in the effort to find someone, but you will be able to get a good amount of money. The surplus you get can be used as a down payment on the car, lowering the loan-to-value.

The lower the amount of the loan, the lower the interest will be. “There are some websites that will let you know the estimated cost of the resale price of your car.” This will help you persuade your car dealer to appraise the price.

Compare loan rates

“Whether you are buying from a car dealer or a private lender, do not just grab the first offer.” You should try to compare interest rates to ensure that you get the best deal.

Get the pre-approval approval offer from different lenders and car dealers. “Of course, you cannot get to know the exact cost at this stage, but this will let you have an idea how much it will cost you.”

Each lender charges different interest rates because of varied fees structure. You should include all these factors while making a decision. Personal loans are usually more affordable than personal contract purchases.

But the latter is an ideal option when you do not have to use your car frequently. “You can own the car at the end of the leasing period or you can return it to your car dealer and lease a new car.”

Try to opt for a shorter loan term

Auto loans can last for five or more years, depending on the monthly repayments you choose. “Smaller monthly payments will extend the repayment period, and as a result, you will end up paying more money in total.”

However, if you choose a smaller repayment term, the size of the monthly payment will automatically go up, and you will save a lot of money in interest.

It is always suggested that you choose a loan with a smaller repayment term. Make sure that the term of the loan is not more than 60 months.

The bottom line

With a weak budget, getting a loan for your car at an affordable interest rate can be challenging. However, there are some ways to make it possible.

Redefine your budget. Unless you analyse it, you will not be able to find the best deal. Compare loan rates and also evaluate the pros and cons between the deals offered by a car dealer and a lender. If possible, you should look for a shorter repayment term.

Instead of trading in your old car, you should sell it privately. This will help you get a lot of money comparatively.