Financing a Car? This is the Digital Tool You Need

This post is sponsored by Capital One, however, all opinions expressed here are my own. Thank you for supporting the brands that help make this blog possible.

When I tell people I’m a financial advisor, they generally assume that my job is to help people manage their investments. Their first question to me is typically some version of “So, where is the market headed?”

While financial planners do indeed help clients grow their nest eggs, there’s more to the job than stocks and bonds. We also provide guidance on short-term financial decisions. It’s not uncommon for us to help clients make decisions on things like buying a house, undertaking home renovations, paying for weddings, and shopping for cars.

Perhaps unsurprisingly, purchasing a new car is one of the most emotionally taxing major-purchase experience. That’s because consumers have an inherent distrust in the car-buying process. In fact, only 6% of car purchasers think the car buying process is completely transparent, with 20% saying it is not at all, according to a survey sponsored by Capital One.

So, how can you buy your next car with less stress and more transparency? Auto Navigator by Capital One is an excellent answer.

Let’s take a look at Auto Navigator in action.

Meet Sarah. She is in her 60s and recently divorced. This is a complicated time for her, finances included. Sarah had a 2004 Lexus with 182,000 miles on it. She’d literally driven it until the wheels were ready to fall off. But because of the complexity and stress of her divorce, Sarah didn’t have the time or energy to car shop.

Sarah came to me for advice on how best to pay for a new car. Which accounts should she tap? Or, should she get a car loan? She was looking for a starting point. What’s more, she hadn’t been to a car dealership in over a decade and felt nervous about going alone.

Initially, Sarah considered using money from her IRA. I advised her that taking a big chunk out of her retirement savings would cost her much more than the withdrawal amount because it would create additional taxable income. (Sarah is over age 59 ½, so any money pulled as a lump sum from her IRA would have counted towards her adjusted gross income).

There was another option – Sarah could pay cash for the car, as she had the funds available in an after-tax savings account. But, that would have dramatically reduced her emergency fund. Since Sarah is recently divorced and still reworking her budget and finances, I suggested that she would be better served to finance the car at a reasonable rate with monthly payments that fit her new retirement budget.

Sarah was prepared to make a small down payment and then finance her new car, so long as the payment was under $550 per month. Once Sarah decided how much she was willing to spend on a car, we turned to Auto Navigator to guide her through the buying and financing thicket.

This all-in-one online tool lets consumers search more than three million vehicles from over 12,000 dealers until they find a car that fits their needs and budget. Using Auto Navigator by Capital One, you can search by make and model, or, as we did in Sarah’s case, by monthly payment.

Once you have a list of possible vehicles, you can narrow it down further by selecting features you’d like to have in your new car, keeping cost in mind. Auto Navigator also allows you to play with money – Sarah was able to build her offer by editing factors such as asking price, down payment amounts, different term lengths and more.

Auto Navigator even allows you to submit specific information to get prequalified for an auto loan. “But Wes, won’t this ding my credit?” Sarah asked. The short answer is no. Auto Navigator conducts a soft inquiry, which doesn’t impact your credit score. Many lending companies use soft inquiries for applicants, and these credit pulls do not impact your credit score like hard credit inquiries do.

To find Sarah’s perfect car, we specified a $1,000 down payment and the trade-in of her 2004 Lexus, valued at $1,588. We pressed a button and, voila! There were over 100 cars that fit her criteria. What’s more, her pre-qualification was good for a month, which gave her time to visit the different dealerships and test drive the cars.

Sarah is far from alone in making the financial piece of her car purchase, which is really the crux of the entire decision-making process. In fact, according to that same study from Capital One, 62% of car purchasers ranked finance as the most important part of the car-buying process. This included budget determination, credit score check and financing options.

In the end, Sarah went with a 2015 Lexus ES with 17,750 miles. It had all the bells and whistles she wanted, like heated and cooled seats. She drives her new car with confidence, knowing she made a prudent financial decision.

While there’s no right or wrong way to find and finance your next car, it’s always helpful to have online tools that help you sort the wheat from the chaff. Auto Navigator by Capital One allows you to understand, and ideally to optimize, the financial realities of making this large purchase. Cars come in all shapes and sizes, and now, with Auto Navigator, financing does too. Smart, easy and effective, this method helped Sarah find her next new car.

How will you find yours?

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