It’s time to shop for an automobile. You have some decisions to make: do you want a used vehicle or a brand new one? What model and options do you want? Will you go to a car dealer or do a private sale? How will you pay for the car: use cash or get an auto loan? Here’s some information to help you answer these questions.
Auto Loan Shopping TipsYou don’t want to be pressured into buying an automobile that you don’t want. So before you go car shopping, prepare yourself. Here are some suggestions:
- Research the type of car you’re interested in. Check in the library, bookstore or on the Internet for features, prices, dealer’s costs on new cars and book value on used autos.
- Comparison shop in the newspaper, online or at dealers to see what is available and what prices are. Car-buying services can also help make comparisons.
- Don’t be afraid to negotiate the price. Often dealers will bargain on their profit margin: the difference between the sticker price and what the dealer paid.
- When considering a new car, buy from the lot if you see what you want. You may be able to negotiate a good price because dealers like to reduce their inventory. But don’t take a more costly car with features you don’t need. Order the vehicle as you want it.
- Test-drive the car on various road conditions—highway, side streets, hills, etc.
- If you’re considering a used auto, examine it carefully using checklists from car magazines, books or websites. Ask for the car’s maintenance record and bring it to a mechanic to be inspected.
Auto Loan Buyer’s GuideMany people choose to buy their autos in a private sale because (1) you get to speak directly to the owner for information on the car and (2) private sales are often less expensive than dealers. However, private sales are not covered by the Federal Trade Commission’s Used Car rules. This is important because the FTC requires dealers to post a Buyers’ Guide which states:
- Whether the vehicle is sold “as is” or carries a warranty.
- What percentage of repairs the dealer will cover under the warranty.
- That spoken promises are difficult to enforce (so get everything in writing).
- The car’s major mechanical and electrical systems, including major problems you should look for.
Cash or Auto Loan?Now that you’ve found the car you want and made sure it’s worth the price, you have to decide how to pay for it. Cash is cheaper because financing adds on costs. In fact, it may be to your advantage to get a less expensive car that you can pay for in full. But most often a total cash payment is just not possible, particularly for a new vehicle. So you need an auto loan. Again, here’s some information for you.
When you take out an auto loan, you must pay for the credit as well as the actual cost of the car. Credit charges include interest, fees and other loan costs. You should know how large a down payment is required, the amount of your monthly payment, how long you have to repay, and the annual interest percentage rate (APR).
Generally, interest rates are lower and repayment periods longer for new cars than for used. But don’t be discouraged or accept the first offer you see. Dealers and lenders have varied auto loans and terms, so shop around to get the best deal. Also, be aggressive in negotiating the terms you want.
A Closer Look At Auto LoansAn automobile is a big ticket item and so is an auto loan. Here are just a few more questions you may be asking:
Where do I apply for an auto loan?You may get a car loan through the dealer, a bank, credit union or other lender.
Where will I get the best deal?Very often it seems that the best financing would be with the dealers because of their many promotional financing deals. Low interest rates, rebates, and delayed payment programs are attractive. But beware, the promotions usually have a catch, like the “no payments for a year program” that simply jacks up the payments for the remaining years of the loan to cover the skipped 12 months. The low promotional interest rate may preclude any negotiation on price. Also remember that the dealer is usually just a middleman for banks or finance companies. Their “finder’s fee” will be included in the price of your auto loan. Why not go directly to the lender yourself?
As you are looking around for your auto loan, keep in mind that your credit history is going to have an effect. Any lender will pull a credit report or credit score. If your credit is good, you not only will get the loan, but at a lower rate (APR) than if you have bad credit. Again, don’t be discouraged. You probably will find a lender and pay a bit more with less attractive terms. But if you can meet that financial obligation well, you will have a car and be on your way to improving your credit score.
Now that you know what to look for in an auto loan, why not start by checking out rates at these auto loan websites found here.