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Top 10 Financing Tips & Strategies for Purchasing a Vehicle

  • September 2, 2021

Are you looking for auto loan financing? Personal finance experts recommend getting pre-approved before you start shopping instead of relying on dealer financing. And when you choose credit union car financing, you can expect favorable terms such as potentially lower interest rates, smaller loan minimums, and a better chance of approval if your credit isn’t as high as other lenders require. Keep reading for our best car buying advice!

1.  Improve Your Credit Score

The higher your credit score is, the better rate you can qualify for on your car loan – this will save you money. Before getting pre-qualified for a vehicle loan, review your free credit reports and check your FICO score or an estimation of your score. Free credit monitoring apps like Credit Karma and Credit Sesame can show you your estimated score and provide tips on how to raise it.

If you need more support with improving your credit score, SkyOne members can talk to a BALANCE financial counselor for free. We also have more tips for fixing your credit on the blog.

2.  Be Realistic About What You Need

The primary purpose of a car is to get you where you need to go. Anything more than that can be fun, but don’t let shiny new features break your budget.

For example, you could save thousands of dollars on an older model if you’re willing to live without every technological bell and whistle currently available. Technology is always changing anyway, so keep your focus on finding a comfortable and reliable vehicle to get you from Point A to Point B.

Also, consider the type of vehicle (sedan, SUV, truck) that best meets your needs. Some makes and models have a higher upfront cost and may also be more expensive from gas and maintenance costs over time.


Having a better credit score will get you a better rate with lower monthly payments - aim to get your score in the excellent range.

3.  Get Pre-Approved Before You Test Drive

The last thing you want to do is step on a car lot without getting pre-approved. Knowing how much you can afford will help you narrow your options, decide how much to put down, and give you the best interest rate as well as the leverage of not depending on dealer financing.

To begin the pre-approval process, you’ll need to provide basic personal information, proof of income, and submit a credit check. Click here for details about loans and rates or contact us if you have questions about getting pre-approved – plus, you might already be pre-approved.

4.  Opt for the Shortest Term You Can Afford

While shorter loan terms will have a higher monthly payment, they also come with benefits like a lower interest rate, less interest paid overall, and less risk that you will still be paying for the car when you have to or want to get a new one. That’s why it’s worth choosing the shortest loan term you can comfortably afford. You’ll pay the car off sooner and can enjoy some time without a car payment before you’re ready for your next vehicle purchase.

5.  Negotiate the Purchase Price if Possible

The Internet brought more transparency and competition to car dealers, making it easier for buyers to get the best possible price. Here are the best strategies to try:

  • Research comparable models listed at lower prices online.
  • If you have a specific make and model in mind, you can call several local dealerships to ask for their best price, then compare offers.
  • Don’t negotiate monthly payments. Negotiating monthly payments is not the same thing as the purchase price and will cost you more money over time.
  • Focus on what can be negotiated (documentation fee, advertising surcharges, additional dealer markup, and unwanted extras) instead of what can’t (registration fee, taxes, and destination charge).
  • If you can’t get the price any lower, ask for something you want, like lifetime oil changes.
  • If you are trading in your current car, research its value beforehand. Use that information to your advantage in negotiations.
  • Ask for a separate trade-in transaction instead of having both the trade-in and purchase on the same paperwork. Doing this limits the number-manipulating dealers can do.

If possible, negotiate the total price of the car down as much as you can, not the monthly payments themselves.

6.  Avoid Unnecessary and Expensive Add-Ons

Since Internet-savvy consumers have made it harder for dealers to overcharge for the car, they will push add-ons to increase their profit margin. Some of those add-ons would include:

  • Extended warranties
  • Tire protection plans
  • Paint protection plans
  • Gap insurance (SkyOne offers lower-cost Gap insurance if this is important to you)
  • Lifetime oil changes

These are some of the most common extras dealers will try to add to your purchase agreement. Do your homework beforehand to see if you want or need any add-ons and, if so, where the best place to get them is – here’s a hint: the dealers probably will not have the best price.

7.  Put Down 20% or More If You Can

Ideally, you should put down at least 20% of the purchase price when buying a new or used vehicle. While a 20% down payment isn’t required, it will decrease your monthly payment and help you get a better interest rate. You’re also less likely to find yourself “underwater” on your vehicle loan, in which you owe more than you could sell it.

8.  Buy at The Right Time

Buying at the right time is about the calendar year as well as your timeline. For starters, it’s best to pay off your current vehicle before purchasing a new one. A dealer may offer to “pay off” your existing vehicle loan as part of the trade-in. Note that usually, the balance is added to your new financing, driving up your monthly payment and resulting in more interest paid over the life of the loan.

At the same time, it’s best to start looking for your next car before you genuinely need it (i.e. your current car dies). Looking for your next vehicle before you need it could get you a better trade-in deal—additionally, you’ll have the time you need to find the right vehicle at the right price. Having to find a new car quickly and under pressure can lead to impulsive or disadvantageous decisions.

Look for discounts and sales around major holidays and long weekends to get the best price on a vehicle.

In terms of the calendar, car dealers typically offer more promotions, discounts, or buying incentives at the end of each month, the end of summer, and the end of the year when they need to move last season or last year’s inventory to make room for new inventory. This is why you’re likely to have an easier time negotiating prices and getting what you want if you’re buying during any of these times. Most dealers also have sales around major holidays and three-day weekends.

9.  Be Ready to Walk Away

Having the mindset to be ready to walk away is the ace in your pocket, the escape hatch you can use to walk away from a bad deal. Don’t worry about the amount of time you’ve already spent negotiating. If the dealer won’t budge or your intuition tells you you’re not getting the best possible deal, there’s nothing rude about politely saying you need to give it more thought before making a decision. Watching you walk away might prompt the dealer to come around to your view of things. If not, you’ve saved yourself from overpaying for years on a potentially bad deal.

10.  Refinance Your Loan

Remember that you can always refinance your vehicle loan after your purchase, so if you didn’t get the best deal, your credit score is higher, or interest rates have fallen, it’s worth contacting us to see if you can get a better deal.

The average monthly payment for a new car is $563. Used cars have the lowest average monthly payments at $397.

Finance your new or used car with an Auto Loan from SkyOne!

Ready to start shopping for your next car? Learn more about our auto loans, and auto loan refinance. Apply online today – you might already be pre-approved! Did you know that SkyOne also offers Auto Insurance? Get a free quote today!


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