Considering a new vehicle purchase? An auto loan might be in your near-term financial future. Before signing the dotted line, it's important to understand the details of vehicle financing. Yahoo Finance contributor Ross Mac joins Wealth! to offer tips to help prospective buyers navigate the auto loan landscape at a time when monthly payments have seen a steep rise in 2024.
Catch more of Ross Mac on Yahoo Finance through his newest podcast, "Financial Freestyle with Ross Mac." Listen to his first episode where he interviews TIAA Chief Administrative Officer Derek Ferguson.
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
This post was written by Angel Smith
Video Transcript
If you're in the market for a new car, getting the right auto loan is important for keeping your budget intact here with some auto loan tips is Yahoo, finance contributor and host of financial freestyle on Yahoo Finance, Ross Mac.
Hey Ross, how you doing, brother?
I'm good.
I'm good.
Ok, so what do people need to be keeping in mind as they're trying to make sure that affordability is being prioritized but also protection and coverage when they're making that auto purchase first things first, you gotta know your budget when you're in the market for a car, right?
I think when we start thinking about what we're spending our money on quite often, we're overspending, especially when it comes to a car.
A good rule of thumb.
Try not to spend more than 10% of your monthly take home income, right?
And so just to give you an idea, the average car note payment for this year 2024 it for a new car is roughly $723 meaning that a person should be making $7000 take home income, right?
And so obviously, that's not the average.
So as you can see quite often a person probably will be overspending when it comes to a car unless they're willing to live within their means.
Another thing to think about is you have to prioritize your credit score because that could be the difference in paying, you know, thousands of dollars just based on purely the interest rate that you're gonna get.
Right.
And I think another thing as you're thinking about your credit score, you wanna say, what could I be?
What could I be doing now?
Leading up until that time I purchased my car, meaning you don't wanna make any new big purchases.
A K A applying for any new credit, you don't wanna be closing down any other credit cards or any credit that you have because that's gonna just overall make your length of credit history uh lower.
Uh And another thing to think about is just understanding overall what your affordability you need to go into the market saying, hey, you know, there are other costs associated with that car, not just the car note, you got insurance, you get maintenance, you get obviously the interest rate and, and a few other things, gas, right?
And so if someone has a dotted their dotted their I's cross their t everything, secure themselves alone.
It's now the time to head to the dealership.
What are some tips that people should follow to make sure that they stay in their budget when they're making that purchase I love that.
I think first things first go online and get pre-approved, going into the dealership.
I love the, the concept of going in there saying, hey, I've been pre approved for $60,000 or for whatever the number is, right?
And then that gives you the ability to still stay within that range and not, you know, be tempted with a few other things.
Right.
Uh, because when you go in there, you got, I understand that dealer financing often is more expensive, right?
I think, you know, the the car sales might make more money if you're using dealer financing as opposed to saying, oh, I'm pre approved, here's my paperwork.
I'm ready to go.
And so that's something to think about.
Another thing to think about is, you know, understand those add ons, right?
That that car salesman say, do you want this extended warranty or do you want this or do you want that?
It sounds good, but just understand how quickly you can have, you could go from $50,000 car to $65,000 with a few add ons.
So those are the things that I would recommend, right?
Do I need the sport package?
Do I need it?
Is it gonna get me to work faster?
This is just A A to B Car Ross.
Thanks so much for taking the time.
Great to see you and make sure to check out financial freestyle on Yahoo Finance Mondays 12 p.m. Eastern with the man himself.
Ross Mac.
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