Car Loans – Do Your Homework
Before signing on the dotted line and agreeing to finance a new car or refinance your existing car loan, do your homework and gather valuable information that will help you make a wise decision.
Know your FICO and other credit report items. The overall number assigned to measure your credit worthiness doesn’t tell the whole story about you or your ability and willingness to repay a loan. But it’s used by every lender you approach and will have a strong influence on whether the loan is approved and what rate you might receive.
Remember to request a copy of your credit report from the three reporting agencies and go over them with a fine tooth comb before seeking a car loan.
[Equifax: PO Box 740241, Atlanta, GA 30374; www.equifax.com
Experian: PO Box 2002, Allen TX 75013, www.experian.com
TransUnion: PO Box 2000, Chester, PA 19022; www.transunion.com]
Next, consider carefully whether any 0% loan offered by a dealer is the best deal for you. That number certainly looks attractive, compared to the 4% or higher that is often the next best thing. But you might actually be better off taking the immediate cash rebate instead.
Make use of loan calculators found on the internet to determine what deal is best for you. You may find that your monthly payments or the overall repayment amount is lower with a low interest rate, such as 4%, and a good rebate than if you had a 0% loan.
Before you go out shopping for a new car have your financing set. This is always a plus because it lets you know exactly what you can afford to spend on a car and what your monthly payments will be.
You’ll also have a bargaining advantage negotiating with the dealer, since part of the purchase price they offer is always dependent on whether they will make the loan. Dealers will often accept a lower purchase price if you take their financing offer. Run various scenarios in advance to determine where your trade-off amount starts.
It may well be worth accepting their financing offer if the purchase price is low enough. You can refinance the day after, after all. That too has costs, though, so be sure to include that in your calculations.
Having your financing set before shopping gives you great buying power. If a dealer is not offering a good price you can confidently move on to another dealership. The value of a new car is basically the same anywhere. It doesn’t hurt to shop around. It is good to consider, however, the reputation for service after the purchase that each dealer has.
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