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A New Car Loan -- Take it seriously!

A new car is going to be one of the biggest investments of your life and it's important to treat it with the level of importance this financial event deserves. Since there's usually tens of thousands of dollars on the table with such an investment, the car loan is sure to figure into the equation. This makes the car purchase a more complicated affair than just dropping a heap of cash up front to buy the car.

Having a budget and discussing the details of that budget with your prospective lender are a good start to securing a new car loan. Don't just have your budget in mind. Take the time to right it out with details showing your income, how much debt you currently carry, and where you will save on expenses. If you need help in preparing your budget, ask for it. It's very likely that you know someone who's good with their money and may impart a little of their wisdom to help you lay out a carefully thought out plan. And, neatness counts. If your budget is in an easy-to-read, well-organized format presented in a file folder, your lender will take it to mean that you're organized and will also appreciate taking some of the work out of reviewing your finances.

Once you've worked out your budget, gotten approved for a car loan and selected the model you want, it's time to look at the down payment. Many people walk into a car loan thinking that life will be a little easier if the can pay as little as possible on the down payment. This may be a little easier on your wallet in the beginning, but it can actually cost a lot more money by the time the loan's term is up. You'll be adding to the total amount of money you'll be paying interest on which can run into hundreds of dollars -- there's just no need to flush that money away. Starting with 20% down gets you off to a good start. But, if you can afford it, pay more. Paying as much as you can up front will protect from excessive interest costs and from getting in the position of being upside-down on the car.

Making a sizable down payment can have another positive effect on your car loan that you might not have counted on. Your lender is making a judgment call on whether or not you're a good credit risk by how you approach such a large purchase and being tight with your cash up front can be interpreted as a sign that you lack confidence in your own ability, financial or otherwise, to meet the obligations of the loan. A big down payment lets the lender know you're being serious about this investment and may be willing to offer a low-interest car loan as well as negotiate other conditions along the way.