Ask the Expert: Common Car Buying Questions
Updated: April 25, 2022
There’s nothing like that new car smell, shining paint, and all the latest features that come with a new car. However, the process leading up to the big moment of driving your car off the lot may seem intimidating. Whether you’re buying your first car or your fifth one, we’re here to help make the process as smooth as possible.
Things have certainly changed when it comes to buying a new car especially in today's market. To help, we asked our centralized lending manager, Tracy, to share his tips and answers to frequently asked questions when it comes to car buying.
Is now a good time to buy a car?
Tracy: While the limited car inventory has changed the market considerably, it depends on whether you're buying new or used and the type of car you're interested in purchasing. Car dealerships have adjusted to low inventory levels by offering higher prices for trade-ins and prices they pay at auction for a used car. As a result, the sales price of used cars has increased significantly over the past year. If you have the time to shop around and potentially order a car, now may be a better time to purchase a new car versus a used car. Keep in mind when ordering a new car that you may be required to make a deposit and potential wait time to receive your new car could be a few weeks to a few months in some cases. The good news is that the rates on car loans are still low. It's important to consider these things as you do your research and shop for a car so you can figure out what works best for you.
How do I know how much I can afford?
Tracy: You may have your heart set on a specific car, but can you afford it? Will you still be able to maintain your current budget and lifestyle if you purchase the car? Before you start shopping for a new car, you’ll want to take a realistic look at your finances. Start by creating a budget to determine how much you can afford to spend each month on a new car.
Most financial experts recommend allocating up to 20% of your budget for all car expenses. These expenses include car payment, insurance, gas, maintenance, and repairs. Here's more information about budgeting if you're looking for extra tips.
Does my credit score matter?
Tracy: Yes, it matters! Your credit score is a reflection of how much risk you present with paying off debt. It helps us determine the interest rate you’ll pay to finance the car loan. If you have a higher credit score, you may be offered a lower interest rate. On the flip side, if you have a lower credit score, you may have a higher interest rate. A higher credit score tells us that you’re likely to repay the loan. A lower credit score tells us there may be a greater risk of failing to pay off a loan or risk of missing or making late payments on the loan. With a poor credit score you can expect to pay a higher interest rate which can make your monthly payment higher.
Before you start shopping for a new car, review your credit report to see where you stand. If you need to improve your credit score, allow yourself some time to work on improving it before purchasing your car. You can get a free copy of your credit report from each major credit bureau (Experian, Equifax, and TransUnion) simply by visiting AnnualCreditReport.com.
What are the interest rates and loan terms?
Tracy: Our goal is to make it as easy as possible for you to drive away in your new car with a monthly payment you can afford. We offer 100% financing and low fixed rates with loan terms ranging from 48 months up to 84 months.*
Keep this in mind when you’re considering loan term options. With a longer loan term, your monthly payments are lower compared to a shorter loan term. However, suppose your budget allows for a higher monthly payment. In that case, you can get a shorter loan term which will allow you to pay your car off sooner and potentially save on the total amount of interest you’ll pay.
Should I pay a deposit to hold a car?
Tracy: Typically, a car dealership does not require a deposit to hold a car, but in today's market it may be a good idea. I've had members who selected a car and returned to the dealership with a loan check only to find that the car had been sold to someone else. Before making a deposit on a car make sure you are 100% ready to purchase and make sure to get in writing that the deposit is unconditionally refundable.
Do I need a down payment?
Tracy: We do not require a down payment to finance a car. However, if you’ve saved for a down payment, making one is usually a good idea. A down payment reduces the amount you borrow, lowers your monthly payment, and you’ll pay less on the total interest of the loan.
With a down payment, you may avoid being upside down (owing more on the car than it’s worth) which could make it difficult to trade or sell your car later on.
Should I order a car?
Tracy: Ordering your car from the manufacturer, another car lot, or through online car sales has recently become a popular and convenient option, but can take up to six to eight weeks for delivery. When ordering a vehicle make sure that you verify the sellers identity, look through reviews or comments, get a detailed description and history for the car, and use secure forms of payment. Consider and research any additional charges that may result from documentation, delivery, and other charges.
Should I buy or lease?
Tracy: Start by asking yourself a few questions such as, what are my intentions for the car? How long do I plan to keep it before I purchase the next one? Would I save money over time by buying the car instead of leasing it? If you’re someone who keeps their cars long term and ownership is important, buying may be the best option for you. Your monthly payments may be higher, but you’ll save money in the long run because once the loan is paid off, the car belongs to you.
On the other hand, if you’re someone who likes to drive the latest car, travel less than 10,000 miles per year, and car ownership isn’t a significant factor for you, leasing may be an option to consider. Leasing may also be a good option for you if you want a lower monthly payment or don’t want or can’t make a down payment.
How do I finance a car with AllSouth?
Tracy: We make the car buying process simple and easy for you so you can drive away in your new car. All you have to do is apply online through our secure loan application, or if you prefer, you can visit any of our locations. Once you’ve applied, we’ll let you know if you’re pre-approved. You’ll then pick out your car, have the dealer send us the purchase order, and we’ll cut a check for you to take to the dealership.
We’ve also partnered with several local dealerships to offer you the convenience of getting credit union financing at the dealership. Check out our Auto Dealership Locator for a list of local dealerships that offer AllSouth financing.
When it comes to getting a car loan, there are never too many questions to ask. The more you know and better prepared you are, the less intimidating and confusing the buying process can be. If you have additional questions or need assistance with getting started, our team members are happy to help walk you through the process.
* Loan rates and terms based on creditworthiness and qualifying purchases. Rates are subject to change without notice.