Does my credit matter when buying a new car?
Yes! Your credit score makes the process of financing a new car lease or purchase easier. So, does my credit matter when buying a new car? Yes it does. Here are some tips.
Great credit leverages your buying power.
Your credit score impacts your success in leasing or buying a new vehicle. The interest rate you pay and loan amount correlates directly to your credit rating. According to bankrate.com, 718 was the average credit score for new car loan borrowers in Q4 2018. For used cars, 659 was the average score. If your credit score falls below 600, financing for a new car is possible, but you likely face higher interest rates. The best suggestion would be to improve your score before purchasing that vehicle.
Financing options when buying a new car are important.
Do you have a relationship with your own bank or lender? That lender is an excellent resource when buying a new vehicle. With a direct lender, you are guaranteed your rate will not be increased. CarSnoop pro tip: Dealers can raise your interest rate up to three points.
Simply put, you do not have to finance your car with a dealership. Although some dealerships offer competitive financing options, it’s smart to shop around online and through your local bank. Having several lenders pull your credit as the number of reviews impacts your rating.
Should you lease or buy a new car?
Leasing can provide a more flexible financing option since you’re essentially paying for the vehicle only for a period of time. Leasing terms are usually 36 months and the monthly payments are typically lower that purchasing the vehicle. With a lease, however, you will be bound to a strict rule for mileage. If you put a lot of miles on your vehicle annually, leasing would not be a smart option. If you decide to keep the car after your leasing term is complete, you could end of paying more than you would have if you purchased the car from the start. You could also be penalized for exceeding your mileage allowance at lease turn in. Be sure to consider those factors if you’re considering a leasing option.
Listen to our Founder’s advice on leasing.
In all, your credit score matters when buying a new car. CarSnoop works to navigate you through a new car buying experience that eliminates stress and saves you time, money and energy.