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How to Finance Your Dream Car

Brian Williams |


Car ownership is necessary for many of us to get around, especially for those who live far from public transportation. While you may choose to drive something practical for your everyday commute, errands and travel, you probably have dreams of driving a car that’s fun, sporty and luxurious. Owning an expensive luxury or exotic vehicle may seem out of reach, but there are financial options available to make your dream a reality. Here are some ways you can finance and save for that luxury vehicle.  

Set Your Sights on a Car 
The first step to saving money is always to have a goal in mind. Think about exactly which car you’d like to buy and start researching prices. You should have a good idea of exactly how much you would need to pay for your vehicle. Luxury vehicles can range in price anywhere from $50,000 to $100,000, so be specific with your research—decide on make, model, year, interior, exterior and add-ons. If you’re looking to buy an exotic car, the price point will be even higher, so be prepared for some sticker shock.

Plan Financing Options
Once you have a good idea of how much your dream car will cost, it’s time to start thinking about your financing options. For luxury cars with a lower price point, an auto loan is pretty simple to attain. Your interest rate will be determined by factors like your credit score, loan term and down payment. 

Many banks and lenders offer pre-approvals that won’t require a hard credit check, so you can shop around and research loan details without it affecting your credit score. A few things you should keep in mind regarding auto loans:

  • A longer loan term means lower monthly payments but typically carries a higher interest rate, and therefore a higher total price over time. 
  • A larger down payment equates to a lower interest rate and lower monthly payments. 
  • Credit history and ability to pay—determined by your monthly debt-to-income ratio—are important factors in being approved for a loan.

For exotic cars, in particular, your credit score should be top-tier, and you should plan to make a down payment of about 20%. Many exotic auto loan lenders also like to see a history of an auto loan within 50% of the requested amount. 

Consider Leasing 
If you’re unsure about owning your dream car, or worried about its depreciating value, you might consider a lease instead. Most car leases last 24 to 48 months. You will make payments every month and at the end of the lease term have the option of buying the car outright or giving it back. The advantages of leasing include: 

  • The cost of normal maintenance and repairs is included 
  • Lower or zero down payment 
  • You haven’t purchased a depreciating asset 
  • Available trade-in for a newer car at the end of the lease 

Disadvantages of leasing include: 

  • Limits to yearly mileage 
  • Fees for mileage overages or excessive damage and repairs 
  • Little customization available 

Ultimately, each person and car is different, and it’s up to you to decide whether you’d like to lease your dream car or buy it outright. 

Save for Your Dream Car 
Whether you’re leasing or buying, you should plan out a budget and save before taking home your new vehicle. First, use your research to figure out how much you’ll need to put down at purchase. Fees can include a down payment, taxes, title and registration. Thinking about these fees will help you set your initial savings goal. 

Next, calculate the estimated monthly cost of owning (or leasing) your vehicle, to determine whether it realistically fits within your budget. Common auto expenses include: 

  • Loan or lease payments 
  • Insurance payments 
  • Maintenance and repairs 
  • Registration and inspection fees 
  • Gas, tolls and parking 
  • Customizations 
  • Cleaning and detailing 
  • Emergency towing and roadside assistance

It’s a good idea to have some savings set aside even after you buy your car to account for any emergency repairs that may arise. 

Buying your dream car is a wonderful goal to look forward to, and may be more realistic than you think. If you have more questions about how to finance and save for your luxury vehicle, a financial professional can help guide you through the process

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