What Should I look out while Getting Auto Financing or Auto Insurance?
A lot of people want to buy a nice home, get settled, and improve their lifestyle. It is not uncommon that for most of us getting a home is the number one lifelong investment. The second biggest, is obviously a good car. Indeed, it is true that owning a car makes a person’s life comfortable from innumerable aspects. An office worker can easily drive off to work with the car instead of using loaded public transportation, take the spouse to dinner, and then drop off the kids to school in the morning. It saves tremendous amounts of energy, time, and effort just by upgrading the mode of transport.
For many, buying a good car is among the most critical decisions that involves thorough research, experience, and trust. It is really important for car owners to get the right vehicle in pursuing a healthy life. However, while some already have the investment set aside, a vast majority simply cannot rack up the funds to immediately purchase their desired car. This is where car financing option comes to the rescue.
Earlier, when someone used to buy a car it was considered a milestone in their life. As they had to pay a huge amount of money right at the spot. Now, the reality is that few people can afford to buy a car because most people need auto financing whether it’s a new or used car. It’s important for car owners to get enough details of auto financing before taking out a car loan.
Why is it so important? Because getting a bad auto financing deal can force you to pay extra money each month or ruin your credit history for years. Owning a car and paying down a loan payment as quickly as possible is just one piece of the problem. Other unfortunate expenses that one might have to pay are due to the accident.
No matter how good of a driver you are, you will need car insurance to avoid any risk of spiraling into a costly catastrophe. Moreover, in several countries such as the UAE, car insurance comes as mandatory for car owners.
We see in UAE the roads are occupied with more vehicles than anywhere else, and there is a high chance that one may end up with accidents. If a driver has to cover accident expenses from their own pockets then it may really cost them a great fortune. Not only the car owner’s face damages but sometimes it also causes damages to other drivers.
So, for people’s safety, the law has made auto insurance compulsory for all vehicle owners. Taking car insurance helps drivers to deal with financial emergencies that easily solve their huge expenses.
In this blog, the detailed steps of auto financing and auto insurance are discussed. A list of important things that you should know about car loans and car insurance:
Auto Financing
It is common that most car buyers put off the thought of auto financing until they are in dealer’s financing offices. Some of the smart car owners know how much money they need to spend in the car buying process. They even have a plan to finance their new vehicle before heading towards the dealer office and might end up with a dealership.
When you buy a vehicle via a loan then your vehicle serves as collateral. For instance, if you are not able to pay the loan on time then the lender can seize your automobile. And the ownership that lenders have retained until you make the final payment. Once all the payments are paid, make sure to change the owner's name in the hypothecation papers.
Steps on how to Get Auto Financing in UAE
- Get to know your Credit Score
What is the credit score? And what goes into a credit report? The two most important factors on which your credit report depends is
- Your history of making on-time payments.
- You have defaulted on any financial obligations.
Basically, a credit score tells your creditworthiness and ability to pay auto loans at the specified time. It is essentially the score from your credit report that is refined to a three-digit score. High numbers indicate that there is a great chance of a borrower paying back the loan. Whereas, lower numbers show the probability of loan default.
The buyer's credit score is the most important factor that determines the type of loan they will get from a lender. To be very clear, all lenders don’t use the same scoring system. Instead of it, different lenders have different scoring criteria. The three main companies that do scoring are Experian, Trans Union, and Equifax.
If consumers have a high credit score, then getting a car loan with a low-interest rate is a lot easier. But, the consumers with low scores will generally have a harder time getting a loan and they might have to pay a higher interest rate.
- Search and Find a Good Auto Financing Dealer
Car buyers shop at several dealerships for a vehicle, and then they should shop with several lenders to find the best auto financing dealer. Earlier, the buyers didn’t have the multitude of lending options and easy to access information about interest rates that they have today.
Now, everyone can easily get auto financing from large national and small community banks, finance companies, and online banks. Financing companies provide financing to consumers for purchasing assets like automobiles, houses, etc. Most of the financial companies don’t accept deposits while loan money.
It would be best for buyers to visit car dealerships with a financing offer from a bank or lender in their hand. Do these things really give benefit to your auto financing? A pre-approved offer guarantees that you have a loan and can pay the cost of the car you want.
- Before Dealing Calculate the Costs
Before saying “Yes” to the car dealers, it’s important to understand the factors on which your monthly car payment is set. Those factors include the total loan amount that you need, how much you are going to pay monthly, and the loan term.
Car buyers should use an auto loan calculator to calculate the cost. You must be excited and, in a hurry, to drive the car on the road that you wished for. But to be honest, taking a few minutes to check the monthly cost can save you thousands and stress in the long run. Steps through which you can estimate how much loan you can borrow from a bank or lender to start shopping for a car are:
- It would be started from half of your monthly salary. Then subtract the existing monthly installments from it that you had already paid.
- After that subtract 5 percent of all your credit card limits. This step will tell you the monthly car loan payment that you are eligible for.
- The next step is that you have to multiply the car loan payment by 60 months. The result will show you the approximate car value you can go for.
- Subtract the 3 to 4 percent from the value for the interest rates that your bank or lender will charge you.
- Apply for a Car loan Under 60 months
Car buyers take loans from lenders for auto financing of new or used cars and they have to pay back the loan in the loan term. At first, the auto loan terms of 36 to 48 months were considered the common lengths. But now, as cars have gotten more expensive, loan terms of 60 to 72 months are widely available.
In auto financing, the shorter the term the higher the monthly repayment will car buyers have to give, and vice versa. It would be good for the consumer to divide the loan term by 12. So that they get to understand the number of years it will take to pay back for the vehicle.
Longer loans that buyers demand becomes riskier for lenders. So, the lenders have come with higher interest rates. But this thing increases the problem and tension for you. As you generally want to get the short loans that you can afford. Because having shorter loans helps you to avoid paying for car costly-repairs.
If you don’t want to meet with the car repairs or don’t have enough money to make your monthly car installments. Then, make sure that before saying “Yes” to the car dealer, you should calculate the cost.
- Understand Dealership Financing Offers
Once you have searched for old or new car financing and have a pre-approved deal in your hand, now it’s time for car shopping. If you had done the above-given steps and have a financing plan then it can help you a lot to be stress-free in the buying process. Now, your whole focus would be on negotiating a great price for your new ride.
Sometimes auto dealership financing can seem to be a more attractive offer. For instance, deals like 0% financing and large cash back rebates, that will reduce the total amount of your loan, might sound like the best option.
One thing to remember for buyers is that most financing options are available to only qualified ones. If they have a negative credit report or limited credit experience, then they might not qualify for these specials.
Always keep in mind, don’t share every single piece of information with them. Just be polite and keep them focused on the price. Because the longer you keep them focused on the car price that you will pay, the better it would be.
Auto Insurance
It’s the rule of life that the need and importance of anything are understood when one faces some difficulties. Indeed, auto insurance is on the list of those things. Everyone makes mistakes in life and sometimes other mistakes can become your problem. For example, if you had an accident in which somebody has lost their life or some damage has occurred to your or another driver’s car.
Then, with the right type of auto insurance, you can feel protected if another driver hits you. Because people who own a car insurance policy don’t have to worry anymore as the policy covers unexpected expenses.
With the insurance policy, you can avoid negotiating with other car owners involved in an accident. A great auto insurance policy can help you to handle a lot of headaches like repairing and replacements cost of yours and other driver car damages.
Car insurance can help you to cover the expenses of your medical treatments that would be required in an auto accident.
Steps on How to Get Auto Insurance in UAE
- Make and Model of Auto in Mind
In the process of car shopping, car owners most likely searched for the types of cars in which they are interested. If they want a brand-new Toyota car or are interested in a Civic, an insurance agent will give those quotes for models.
Some of the autos make and models will cost you more than others. As time passes, the prices of cars are increasing. Expensive automobiles like luxury cars or sports cars have higher car insurance because of the high market values. And therefore, it also costs car owners more to replace or repair.
Typically, fixing a dent on a $20,000 vehicle might be a routine job for an auto workshop that they handle. But, fixing a dent on a $95,000 vehicle requires an expensive auto workshop which results in higher repair costs.
- Compare Rates of Multiple Auto Insurance Companies
There are two ways through which you can get car insurance quotes:
- Online: Many auto insurance companies offer online free insurance quotes. You can save your time by visiting insurance company websites and compare quotes.
- In-person: Visit a local insurance agent by face that can help you to find affordable car insurance quotes.
It would be an efficient way to compare quotes of multiple auto insurance companies. Because, rates vary among insurance companies, and it would be good if you have more than one quote.
Some key steps to finding the best auto insurance companies are:
- Look at the car insurance company complaint records and customer satisfaction rate. It would be a great start for getting company reviews.
- Get at least three auto insurance quotes online, or from an agent, so you can evaluate the price for the coverage you want.
- After comparing quotes, understand the coverage limits and check that each policy has comparable liability limits.
- Understand What Coverage You Need for Your Vehicle
Most of the UAE states require car owners to carry car liability insurance. And if they are taking auto finance, then most probably their lender will require collision and comprehensive insurance.
For instance, if your vehicle is old and its market value is low, then which coverage would be worth buying for your car is explained below.
Collision coverage helps to pay for car damages that occur in a car accident. This coverage is applied regardless of the fact that who is at the fault in the accident. For example, if your vehicle gets hit by another vehicle at the rear end while driving, then collision insurance will help cover the cost to repair. But, if the situation is reversed and you hit someone from behind, then coverage insurance will help to pay for the front-end damage to repair.
Comprehensive coverage helps to pay for the vehicle damages that are done in non-collision accidents. It can be damaged due to natural disasters, or theft. For example, if any tree branch falls on your car and dents the roof, then the comprehensive coverage will pay for the cost to repair your roof.
- Complete the policy Process with Your Agent
When you have picked the car and know the vehicle identification number (VIN), then the next part is a breeze. You can have your auto insurance policy ready to go before you reached the insurance company. But, if you don’t have the VIN, then ask the agent if they can set up a policy with the information you have, like:
- The address where you will garage the car.
- The drivers in your house.
Once you have decided on the car you want, call the agent with the VIN to complete the purchasing process of the auto insurance policy.
Auto Financing vs Auto Insurance
Auto Financing | Auto Insurance |
The car buyer should apply for auto financing as it is an easy process and requires less documentation. | The car owners should buy car insurance if they want to cover their new car in a way that satisfies their accidental cost. |
The car buyers should calculate the cost before dealing with auto dealer companies. If someone is not in a state of paying money then can take auto financing in a long term. | The car owners would want the auto insurance policy to meet specific criteria. So, that they would be covered if something unexpected happens to the vehicle. |
In auto financing, no additional collateral would be asked for as the loan itself is only secured against the car. | An auto insurance policy is an efficient way for buyers to protect themselves and their families from the unexpected expenses of a large accident. |
Final Thoughts
Nowadays, most companies have taken up the mode of digital services via the internet. Some of the companies provide ease for car buyers by introducing “customized auto financing solutions” to get the car in which they are interested in. Everybody can get an auto insurance policy offline as well as online after buying the car. But they have to make sure to do detailed research in types of coverage before choosing and investing in an insurance policy. Because it will protect them from paying any cost of car damage due to an accident.