Financing an auto


Seven out of 10 new cars are financed, and you can also finance a used car. But to do it right you must be prepared before -- and after -- you reach the car lot!

You can, of course, pay cash.

You can get an car loan from a bank, credit union or other financial institutions. You can have these loans approved before you ever hit the showroom (a major plus in most deals). These sources of financing will usually offer the lowest rates you'll find, and credit unions are generally lower than banks.


You can also get financing from the dealer or auto manufacturer.

A general rule of thumb says that dealer/manufacturer financing will cost you more, but it isn't written in stone. There will be occasions where a dealer will actually give you the best deal. Unfortunately, those occasions are not predictable (despite endless "must sell" and "no money down" advertising by dealers) and the only way to be sure is by comparison shopping.

One other choice is a home equity loan. You'll get a good interest rate and the payments will be tax deductible. But be sure such a loan won't leave you in any danger of losing your house -- after all, it's just a car. If financing is a stretch, your family may loan you money or co-sign for a loan. If they do, make sure ALL parties are fully aware of every detail of the loan and the possibilities should circumstances change or things go wrong.

Keep leasing in mind even if you think you don't want to do it. It may be an option you like more as you go along.


It's all in the numbers
Interest rates on new cars are lower than on used vehicles. And, in general, new cars can be financed over longer terms than used ones. This equation can make a new car cheaper than a used one in many cases.

Not all the numbers in your deal will be set in stone before you buy, especially if you go with dealer/manufacturer financing. The interest rate you pay can vary, and so can the down payment and other details like the value of your trade in or the length of the loan you take. You have to decide. Don't let one number dominate you. For example, a really low down payment is not by itself a guarantee of a good deal. You need to consider all the numbers together to know what sort of deal you're getting.

Dealers will often paint a low price on the windshield, then make their money back when they finance the car. Sometimes, dealers offer very low interest rates for specific cars or models, but then they won't come down a penny on the price. Or to qualify for that rate you'll have to pony up a large down payment. You might find it a better deal to pay higher financing on a low-price car or you may go for a vehicle with a low down payment.

Bottom line -- know your numbers. Be sure, every step of the way, that you know just how much you are paying, when, how and what for! No exceptions!

In simple terms, you will pay a lower monthly amount the longer the term of the loan -- but in the end you will pay out more in total for the vehicle this way. The longer the loan, the longer it takes you to build up equity -- that is, for the car to be worth more than you owe on it. So with a long loan it will usually be some time before you can re-sell the vehicle and clear the loan.


Sign nothing unless you understand what it is, make sure every "i" is dotted and every "t" is crossed and there are no blanks left. Make sure any changes to the basic contracts are signed or initialed by both parties.

If you get embarrassed by a feeling of asking too much, imagine how much fun it will be to tell a dealer later that he has got it wrong and owes you something. He will haul out that contract you caved on.

When you sign the contract make sure the dealership has an authorized representative sign -- you don't want to find out later that the nice salesperson was not empowered to sign on behalf of the dealership.

And always make sure you have copies of everything you signed.

 

How refinancing car loan applications can put money in your pocket

Do you want the lowest interest rates on your loan, but feel locked into your high payments? With a refinancing car loan you can gain the freedom to seek a reduced loan rate. Also, a refinancing car loan is a simple way to improve your debt-to-income ratio.

A refinancing car loan can occur by replacing your current loan with a lower interest rate loan over the same period of time remaining on your loan. You can create a new loan term which will help you keep your payments down by extending the term on your loan. Or you can reduce the length of your loan by reducing the total interest expense.

A refinancing car loan may be for you if you; want to take advantage of lower interest rates and lower monthly loan payments; are locked into an auto lease and want to convert it to a standard loan; want to cash in on the equity of your current vehicle; want to improve your credit rating; or are looking to purchase a new home and want to qualify for a better mortgage.

A refinancing car loan can save you money on your current lease or loan obligation by reducing your current loan rate. Simply, supply your lender with your credit information, and they will call you back with your approval and will go over the rates and terms.