by Kenneth Schortgen Jr

Created on: April 26, 2007   Last Updated: January 03, 2010

The biggest problem with having your auto loan through the dealer is that they are usually not the company that controls the loan they acquire for you. What this means is, you are underwritten from a financial lender and do not have a relationship with that institution in case of problems, questions, or payments.

Car dealers will promote great financing deals at 0%, 1.99% etc... but do not spell out the true terms of the loan until you have already gone through the process and feel an affinity to a car you wish to buy. Most often, the loan requires points which you have tacked on to the loan as a 'fee', and they are not for more than 36 months which doesn't work well for the majority of car buyers.

Ad promotions of great APR or loans is only to get you into the door. Once they have you there and can get your emotions tied into a vehicle, then most people are willing to sign contracts that are not in their favor, and this is the secret behind the offers.

The best suggestion if you are going to borrow money for a car, and get the best financing rate are to do one of two things:

1. Go to your bank and get pre-approved for a certain amount before hand. Then when you find a car you like, skip their financing and see if you can get different options instead of their APR promises as a favor for doing business with them.

2. If you have the credit available... say with an equity loan or large credit card, when you make your offer on a vehicle, tell them you are paying cash (even when you aren't). This will give them more incentive since they won't have to worry about whether you can afford it, and once you pay for the car on your credit card, go to your bank for refinancing and pay off the card. This option will certainly come in your favor because you can almost always get the car for less than its value and when you refinance, the bank will be happy that they only need to lend you 60-90% of the true value of the car, and you will get a better interest rate.

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