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Is it a Good Idea to Buy or Lease a New Car?

Life Stages Blog Series Part 2

Making Sense Of Common Financial Challenges In Life

As the second installment in our blog series about financial planning around major life milestones, NebraskaLand Bank takes a close look at tips, tricks, and things to consider before you walk into a dealership and get tied up with a lease or purchasing agreement.

If you’re coming from a vehicle that barely works, then the idea of a brand new, shiny vehicle is nothing shy of an attractive prospect — but not so fast! Keep the following information in mind, and reach out to NebraskaLand Bank to discuss what your best options are. Let’s get started.

Decide On The Type Of Vehicle

Before you even determine what you can afford, you’ll want to have the right type of vehicle in mind — which, if you’ve struggled trying to get around with a dying vehicle, shouldn’t be difficult. While leasing gives you a lot more flexibility in terms of long-term ownership or a lack thereof, purchasing means that you’re committing to owning this car for many years. Think to yourself: what will I want in a vehicle five or even ten years from now?

Take a Look at Your Own Finances

Without consulting a professional like one of our friendly Bankers (you’ll do this later), consider your overall financial situation. Ask yourself these types of questions:

  • What’s my monthly income? What’s my annual income?
  • What have my spending habits been like over the past 6-12 months?
  • Do I have an established credit score, such as a FICO score? If so, what is it? How can it be improved?
  • How much money do I have in savings, if any at all?
  • Will I be able to make a hefty down payment while responsibly paying all of my bills?
  • What’s a realistic monthly payment that I can make?
  • Do I have any remaining debts to pay off?

Of course, the answers to these questions vary upon each individual’s situation. By thinking deeply about the answers to these questions (and more), you’ll have a much better idea of what your realistic budget is.

Check Your Credit Report, and Then Check It Again

Your creditworthiness is a primary factor when it comes to getting approved for a car loan whether you’re buying or leasing. You should know that you can request a free credit report from each of the three major credit reporting bureaus on an annual basis: Experian, TransUnion®, and Equifax®.

If there are any errors on these reports for any reason whatsoever, you have the right to dispute them. This is better done sooner rather than later so as to give these companies time to process your credit report and allow you to resubmit to adjust for any possible errors. Again, we can’t downplay the importance of your credit score when it comes to buying or leasing a new car.

What’s Your Savings Situation?

If you don’t have any money to put down, you might want to reconsider looking at a new vehicle. Typically, the larger down payment you make, the less you’ll owe in interest on financing. Plus, when you’re able to give the dealership $2,000-5000 right then and there, they may be more likely to budge a little bit when it comes to negotiating a deal. Whatever the case, having money in your savings account is key.

Assess Your Loan Options

Depending on the situation, it could be advantageous to walk into the dealership with a pre-approved or prequalified loan from a reputable Community Bank like us. In many cases, this can be used as another bargaining tool. Bear in mind that your credit may receive a number of hard inquiries resulting in a reduced score. When you’re going through the financing process, compare all possible terms: monthly payment amounts, the length of the loan, interest, and other fees that apply.

Don’t Skip Over The Fine Print

Whatever you do, please do not gloss over the fine print. Though tedious and dense, read over the entire contract — and get a financial professional’s eyes on it if need be — before you put pen on paper. You’ll thank your due diligence in the future when you’re not paying out of pocket for unexpected fees or costs that you didn’t originally factor into your budget.

Let Our Banking Professionals Help You Along The Way

Whether you have specific questions about getting a car loan through us or you’re just wondering what you can realistically afford, we’re here to help you navigate finances during this exciting part of your life. Buying a new car is something worth celebrating, but make sure that you know what you’re doing. Contact NebraskaLand Bank today and feel free to work with our friendly team at any time.