2 of 11

Write now Article Tools

There are two methods of purchasing anything, particularly automobiles: cash and finance. Those who do not have the means to lay down the fifteen to forty-thousand dollars are relegated to the realm of auto finance. Many people go into this with a false bravado and make mistakes which cost them hundreds, if not thousands of dollars.

The first mistake the common auto consumer makes is to accept the terms the dealer is proposing. Often times, dealers get an undisclosed buy down rate from their lending institutions. The individual who signs up at 7.25%, for example, because "that is the best rate available for your credit rating" may very well be leaving 1% to 2% on the table. Everything is subject to negotiation. A little research will save one from getting "raked across the coals" but the dealer may not give up all of their buy down rate.

One must know one's credit score and debt to income ratio, as well as what lenders are willing to loan on the vehicle of interest, considering the credit profile. This should be discovered prior to visiting the dealership in order to negotiate rates and keep expectations realistic. One must also realize that certain vehicles, such as pre-owned vehicles, typically will require a higher interest rate to "get bought" by the bank or finance company. This rate can sometimes be bought down when the credit rating is stellar and the vehicle is a late model.

When considering lending institutions, prior to visiting the dealership, one should consider the bank one does business with. Although the dealer sends much more business to lenders than "John Q. Public" many financial institutions cater to their existing clients for their loyalty, particularly if the existing relationship has been a long one. Some employers offer special financing on automobiles as a fringe benefit, but do the diligence of research before merely accepting that these are the best rates out there. Members of the military and government employees have some special financing available to them which beats most rates currently offered; those members should contact their finance office for more information. Credit unions are, special government programs notwithstanding, typically the lowest rates available for members of their credit union. The only problem is that if one is not a member, often times the credit union will charge a higher rate for new members or not offer financing at all for the first six months or year.

Those with marginal credit should be prepared

• 1
• 2
• next page >>

Add your voice

Know something about A guide to car financing?
We want to hear your view. Write now!