Things You Need To Know About Buying And Financing A New Vehicle

When you are ready to buy a new vehicle, you don't need to be intimidated with price negotiating or securing financing. Here are three tips to help you get ready for financing and buying your new vehicle.

Learn About the Auto FICO Score 

After you have narrowed down the type of new vehicle you want to buy, you should find out what your credit score looks like. Your credit score can determine if you will be able to afford a new vehicle and what interest rate your loan will be priced at. But looking at your FICO score online may not necessarily give you the same FiCO score the dealership or your bank will see when you apply for an auto loan. 

Many dealerships use an auto FICO score calculation to help them adjust your score to reflect the chance you might default on an auto loan. According to Barry Paperno of, the dealership uses a formula to calculate your auto FICO score to give slightly more weight to auto loan-specific information on your credit report. So, if your credit report shows auto loans with negative history, this can lower your auto FICO score. Then, if your credit report has auto loans with positive history, this can raise your auto FICO score. 

Although you won't be able to calculate your exact auto FICO score, you can look at the information in your credit report to make an educated guess to determine if your auto FICO score is higher or lower than your actual FICO score. Then, this information can help you be prepared with what to expect from the loan approval process.

Be Prepared with Your Financing

Before you walk into the dealership of your choice, it is a good idea to get approved for an auto loan through your bank. This will open up your options for the financing cost of buying a new vehicle and give you an idea of what your payment will be on the vehicle and how much you can afford. This also gives you the chance to negotiate with the dealership on the financing. Then, if the dealership is not able to meet or beat your bank loan financing, you have your bank ready to finance the sale. 

While shopping and negotiating for financing with your bank or with the dealership, be sure to keep the length of your loan reasonable. Having a shorter loan length can help to prevent the vehicle's value falling below what you owe on your loan as you are paying the loan off. Then, if you are going to be driving a lot of miles on the vehicle, try to get a shorter loan term. The more miles you put on your vehicle will cause it to depreciate faster, which can hurt you when you want to ever resell the vehicle. If you owe more on the loan that what the vehicle is worth in a few years, you may not be able to sell it.

Know the Vehicle's Invoice Price 

It is always a good idea to know how much you should be paying for a new vehicle, so you should do a little bit of research before you go to the dealership. Find out the invoice price on the vehicle you want, including all the vehicle's options. The invoice price is what the dealership pays for the vehicle. You can find this price from various online sources, such as Kelly Blue Book. 

Knowing the invoice price can help you negotiate the best price with the sales person at the dealership. Keep in mind the dealership will usually get a rebate of a certain dollar amount, or a holdback, which can be two to three percent of the vehicle price, after the sale is final, so the dealership will still make a profit on the sale. 

Use these three tips and talk with different dealerships for more information to help you prepare for the process of buying and financing your new vehicle.