Shopping for car loans is not as much fun as shopping for a car. However, it is equally necessary. Below are guidelines that everybody must follow.
Be Aware of your Credit Situation
Ensure you have a good credit rating. You will want to straighten things out to avoid winding up a higher rate. If you have good credit, do not assume that you will qualify for the 0 percent financing offers that a lot of dealers present in their ads. Even if you know that your credit is blemished, being aware of where you stand is half the battle. Also, it makes sense to check out a full report of your credit status.
Before setting foot in the dealership, get preapproved for financing. Check out local credit unions and banks. Understand that dealers can add to your interest rate to compensate themselves hiding their profit’s size from buyers. You will be able to know if you are getting a good rate out there when you have obtained quotes from other lenders. In case another lender has preapproved you, you can make use of this as a bargaining chip if the dealer presents an APR. For people who have good credit, failing to shop around could as much as 2 percentage points to the loan APR and it can mean a difference of 5 percentage point for those with poor credit.
Select the Shortest Loan that you Can Afford
As vehicles have become pricier, auto loans have gotten longer. These days, you have the option t finance a new set of wheels for at least 7 years. A longer term minimizes the payment every month; however, this will drive up the total cost.
Don’t Get Trapped by the Yo-Yo Finance Scam
You have signed all the documents, got the keys to your vehicle and drive it home, and thinking that the deal is done. After a few weeks later, somebody from the dealership contacts you and says that they cannot get the financing approved at the price agreed upon. The dealership asks you to return the vehicle to them or negotiate a new car loan at a higher interest rate. Failing to do so could lose your trade-in and deposit and the dealership may even charge you a rental fee for the time that you had the car.
The majority of dealers do not consider a sale final until they get the money in their account. This may be stipulated somewhere in the document you signed in the financing office of the dealership. So to protect yourself, you can either obtain financing elsewhere or tell the dealer you are not getting the vehicle until the financing is final.
Don’t Just Look at the Monthly Payment
Getting hung-up on the monthly payment will not give you an idea of what you are being charged for the vehicle, you will not know what you are getting for your old car and will not have any idea of the real interest rate. Remember that getting pre-approved for the car loan before going to the dealership allows you to focus on haggling for the highest price for your trade-in and lowest price for the new car.