NextAutoShow presents a guide with some recommendations that the buyer must take into account when purchasing a new or used vehicle, considering important factors such as their monthly income, the financing conditions, as well as the different credit options available in the market.
1. Evaluate the income and how long the vehicle can be paid:
A car is, after housing, one of the most important expenses, but also a responsibility. The first thing that the buyer must do is analyze if their income is sufficient to cover the expenses and obligations that a car demands: payment installments, taxes, insurance, maintenance and parking.
Whether you buy a new or used car, it is recommended not to spend on a car more than what a person earns in a year of work. To calculate this budget can be taken as a rough reference what type of vehicle is affordable to economic reality and income.
For example if a person charges in soles, but the loan is in dollars and the monthly fee is, for example, US $ 250, it is important that the buyer take into account the fluctuations of the local currency with respect to the dollar to avoid pay more for the same fee, and make sure in what currency the credit is requested.
An important fact is that you should always check with the bank what the Annual Effective Cost Rate (TCEA) will be, instead of being guided by the Annual Effective Rate (TEA) alone. The TCEA is the rate that includes all the additional charges and payments, so you can get an idea of what is really going to be paid each month for the loan.
On the other hand, although the different financial institutions have different conditions, it is important to know that the loans usually cover up to 80% of the value of the vehicle, so it is suggested to have saved 20% of its value as an entrance.
In this case, if a person wants to buy a car of USD 20,000, he will have to pay USD 4,000 at the beginning of the credit. The greater the entry, the lower the credit and the lower the monthly installments. On the other hand, it is not advisable to invest all the savings in the entrance of the car, since it is always advisable to have a percentage of money in the account in case of “unforeseen”. A monthly fee should not normally exceed 50% of the monthly income less the expenses already programmed such as food, education, medicines, credits, among others.
It is important to determine how long I will be paying for my car. For example, banks usually offer loans to be paid in terms of up to 60 months (5 years), although it is recommended not to exceed 3 or 4 years because the longer the duration of the loan, the higher the interest will be. It should be noted that cars are goods that lose much of their value over time.
After the buyer evaluates their budget and their monthly income, it is important to consult the places where they provide financing plans.
If the decision is to acquire a used vehicle, it is best to analyze if the total budget is available to make a single payment, because not all places where second-hand cars are offered offer financing possibilities.
2. Choose among the different financing options:
When looking for the best way to finance the purchase of a vehicle, banks are the first option, since they offer several credit options. Generally, a personal or vehicular loan is usually requested. The basic difference between the two is that in the vehicle the car is the guarantee, so if the person can not continue paying the bank will be left as compensation. In the personnel, this option does not exist, but the interest rate that you will have to pay will be higher because the bank “runs more risk” when lending the money.
Banks are not the only option, some brands have alliances with financial institutions that specialize in loans and can offer the option of finance the car through them. Also the concessionaires, to encourage the sale, try to facilitate the client access to credits and guide the person interested in the task of obtaining the best financing plan.
3. Terms of reference for the type of credit:
In order to obtain the best conditions for a financial credit, it is recommended to consult with several different entities. Thus, the client can choose the option that best suits him and even negotiate to obtain better final conditions.
It is recommended to take into account that the credits usually include the insurance of elimination, which cancels the debt in case of death so that the heirs do not have to assume the remaining payment. In addition, they usually include a vehicle insurance whose coverage will depend on the type of loan and the agreement with the bank.
Most banks offer the option of making a prepayment, that is, paying the rest of the loan at any time and ending before the agreed time.
Once the terms of reference for requesting the loan have been clarified, the interested party can formally request the loan to acquire the vehicle. To do this, proof of income, documentation and any other document requested by the entity must be presented.