How to finance a car

If you want to buy a vehicle — one that currently runs, at least — you’ll probably need a loan. The average new car price has surpassed $48,000, according to Kelley Blue Book, and more than $26,500 for a previously owned one. Fortunately, you can still find thousands of vehicles for less than that on KSL Cars. Still, most people don’t have that much cash stashed in their fake houseplant. What is the best way to finance a car?

Consider your budget

Before you start shopping — and become enamored with an out-of-reach vehicle — decide what you can afford. Edmunds recommends owing no more than 15% of your monthly take-home pay for a car payment. But you should also look at your budget as a whole, taking into account all of your expenses. When calculating a monthly payment you’d be comfortable with, remember to include other car related expenses, as well — gas, maintenance, insurance and annual property taxes. Browse cars for sale

Check your credit

The loan amount you qualify for, and the accompanying interest rate, will depend in part on your credit score. Creditors look at your score — which ranges from 300-850 — to determine the likelihood you’ll make your payments on time. It’s based on several factors: payment history, length of payment history, amounts owed and available credit — how much you could potentially borrow. For example, having a few credit cards you pay on time may boost your score; having several credit cards with high balances may lower it.

You can check your credit score at no charge once per year with the three major credit bureaus. Your credit card company may also provide a free credit check, sometimes monthly. This informal “soft” check won’t affect your score.

Low score

How do you finance a car with poor credit? If you find yourself in the lower range, you may want to try improving your score before applying for a car loan. If that’s not an option, try bringing in a larger down payment. The less you need to borrow, usually the better the interest rate. And your chance of approval. Check out some dealer listings

Find a deal

Shopping for a car loan can be time consuming — and may actually harm your credit score. Every time you apply to a different bank or credit union, a “hard” inquiry is made to the credit bureaus, which may lower your score by as much as 10 points. If you complete several car loan applications within a few days, however, credit bureaus consider it one inquiry.

But what if you have less than ideal credit? You can apply for preapproval regardless of your score.

Quickly apply

How do you start financing a car? You’ll need to provide some basic information.

• Name, phone number, email address

• Social security number

• Driver’s license number

• Home address

• Mortgage or rent amount

• Job history 

Get preapproved

Getting prequalified does not obligate you to purchase a vehicle. But it does give you assurance that you can get a loan when you find the vehicle that fits your needs.

Ready to hit the road? Calculate what you can afford, get preapproved for a loan, then shop KSL Cars for a sweet, sweet deal.