Alaska Car Loans: Tips for Buying a Car or Truck

Purchasing a car or truck can seem daunting - there is so much to consider.

What type of vehicle should you purchase? How can you tell if you are getting a good rate on your loan? How much should you put down toward the purchase?

Fortunately, there are simple steps you can take in order to ensure that your car-buying experience is a positive one.

Determine Your Budget

Many buyers will fall in love with a car or truck before determining how much they can really afford. Such a misstep often results in consumers finding whatever means necessary to secure the funds to purchase the vehicle - even if buying the car or truck is not in their best interest.

The very first step one should take when purchasing a vehicle is establishing a budget. Financial experts recommend that monthly auto loan payments should not exceed 15 percent to 20 percent of the purchaser's gross monthly income.

In addition to loan payments, a budget to purchase a vehicle should incorporate other costs tied to ownership, including insurance, gas, and maintenance. It is a good thing to be able to afford your monthly loan payments - it is even better to be able to afford to actually drive your car or truck.

Secure Financing First

One of the biggest mistakes car shoppers can make is to finance a vehicle through the dealership, at least doing so without securing other auto loan quotes first.

Securing financing prior to visiting a dealership positions the consumer as an empowered buyer and provides that consumers with real bargaining power. When you have financing already in place, the salesperson will look at you as cash on the table and will do whatever he or she can to close the deal.

In addition, a dealership might offer you an even better interest rate than the financing you have secured already.

In order to secure the best auto loan rate, you will want to shop around, and the Internet can serve as a great tool for obtaining several auto loan quotes. In addition to shopping around, you should do some research on the current prime interest rate so you will know what interest rate you should be able to get on an auto loan.

Put 20 Percent Down

Some dealership promotions boast that you can drive a car of the lot that day without putting any money down. While this ploy sounds tempting, you should realize that by putting nothing down, you will be upside down on your auto loan within one year of driving off of the lot.

Vehicles typically lose 20 percent of their value during the first year of ownership, which is why experts recommend that consumers put down at least 20 percent toward their purchase. This step will ensure that you do not end up owing more on your auto loan than what the car or truck is worth.

Purchase Auto Insurance

Most consumers know that an necessity to owning a vehicle is purchasing auto insurance, which not only provides financial protection if you are in an accident but also keeps you legal since all 50 states require drivers to carry auto insurance.

In Alaska, the state minimums for auto insurance liability coverage are $50,000 for bodily injury for one person, with a maximum of $100,000 for all injured persons, and $25,000 for property damage.

However, you might want to consider purchasing more than just the state minimum for auto insurance coverage, especially if you possess assets of value to you. If you are in an accident and the costs associated with that accident exceed your insurance minimums, the accident victim can come after your home, your car and even your retirement savings to cover any remaining costs.