If you’re interested in shopping for a used Mercedes, you’re making a great decision. A used or pre-owned Mercedes will offer a fantastic driving experience but is much more affordable than a brand-new model.
But when you’re buying a car, the actual price of the vehicle is just one part of the puzzle. You want to make sure that you get a great price on the car – but you should also try to get a great rate on your auto loan. How? Here are a few of our top tips.
1. Start By Knowing Your Credit Score
Your credit score is the biggest factor when it comes to the loan rates you’ll get. As a rule, the higher your credit score is, the lower APR (interest rate) you’ll pay, resulting in a cheaper auto loan.
You can get a free copy of your credit report once per year from Annual Credit Report, a U.S. government-funded website. Then, once you see your score, do a bit of research on rates for used cars in your area, to understand how much you can expect to pay.
2. Create A Budget To Understand What You Can Afford
Once you know the APR you can expect to pay, you can use a car loan calculator, and play around with some numbers to see what you can afford to pay every month, as well as the total cost of a loan. Use this information to create a budget – this will make it easier to understand which used Mercedes vehicles are in your price range.
3. Don’t Open New Credit Accounts When Car Shopping
You should avoid doing anything like opening new credit cards, or opening any other credit accounts when car shopping. Doing so can actually harm your credit score, which may result in a more expensive loan.
4. Get Pre-Approved For A Loan Before Shopping For A Used Mercedes
While most used Mercedes dealers will offer in-house financing, getting pre-approved for a loan from another local bank or credit union may help you get a better rate.
Loan pre-approval also proves to the dealer that you’re a serious, qualified buyer, which can help you when negotiating the price of a used Mercedes.
It’s likely that each bank will offer you a different rate, so check out a few different places, and see who will offer you the best rate.
5. Limit “Loan Shopping” To A Two-Week Period
When you apply for a loan, a “hard inquiry” is applied to your credit report. This will lower your score slightly. But don’t panic! This is normal – and, on the bright side, any loan applications made within a 2-week period will only impact your score once.
However, if you keep applying for loans outside of this period, your credit score may decline again – and you won’t get the best deal. So when “shopping” for a loan, limit yourself to a 2-week period. This should be plenty of time to get approved for a loan, and buy a used Mercedes.
6. Beware Of Long Term Loans With Low Monthly Payments
The longer your loan term is, the lower your monthly payments will be – but your loan will be more expensive in the long run.
What do we mean? Let’s consider a loan for a pre-owned $40,000 Mercedes-Benz GLE 350. A 5-year loan at a 4% APR will cost you $737 per month. Over the lifetime of the loan, you’ll pay $4,200 in interest.
But if we extend that loan term to 6 years, you’ll pay $626 per month, but more than $5,000 in interest. Extended to 7 years, you’ll pay only $547 per month, but nearly $6,000 in interest.
Because you’ll pay more in interest for a longer loan, and your car will continue to depreciate and lose value, you could end up being “underwater.” That is, you may end up owing more than the car is worth, even after paying it off for several years.
So make sure you stick to your budget. Understand how much you can afford to pay each month, and don’t try to extend your budget by getting a longer loan term.
Follow These Tips – Get A Great Deal On Your Used Mercedes!
Shopping for a car loan may seem tough, but it’s simple. As long as you understand your finances and your credit score, and the basics about how car loans work, you can make sure you get a great deal when financing your next used Mercedes!
This content is sponsored by Ben Obirek.