Auto Financing
Understanding Auto Loans
The single most important thing you can do to ensure you get the
best auto financing deal for your new car is to ask questions. Do
some research until you're comfortable with the topic of auto
financing.
Once you understand the basics of car financing, write out your
questions before shopping for your auto loan.
For example:
Here are some key auto financing points that you'll need to know. And to make sure you get the best deal and don't get ripped off, make sure you get answers to these points and that you fully understand them. Read our page on Auto Finance Terms for a more complete explanation.
Interest rate:
The APR (annual percentage rate) is the best way to know what interest you are paying. It is the actual interest rate you pay annually on the unpaid balance of the loan. The rate you are offered will to a large extent depend on your credit score, a number that dealers get from your credit report.
Loan penalties:
Does paying the loan off early entail penalties? Are there any other possible extra charges that could occur during the term of my loan.? Are there "hidden charges," which are effectively penalties.
Trade-in or sell:
The market, not what you think the vehicle is worth, will set the value of your transportation, be it a trade-in or a private sale. Conventional wisdom says don't talk about trade-in price until you have settled on a price for the new car.
The trade in is part of the dealing process; don't fail to use it to maximum value. The dealer may offer you a good price, but then get some of his money back on your new vehicle financing.
Make sure
you see where your trade-in money is being applied to the financing,
otherwise, some, most, or even all of it, might never go to making
your new car payments lower.
You'll usually get more selling privately, but it can be more of a
hassle. Do the same research you'll do for your new car -- plus
check local used auto classifieds -- to find out your best asking
price.
Get the best price:
You know not everyone pays sticker price. One way to get the best
buy is to know how to haggle the price down. Dealers may be willing
to bargain on their profit margin, often between 10 and 20 percent.
Usually, this is the difference between the manufacturer's suggested
retail price (MSRP) and the invoice price.
Research your prospective buy -- new or used -- and compare it to
others. Arriving at a dealership aware of the price of the car you
want to buy is a major advantage. Some sites that offer pricing as
well as other information are Kelley Blue Book, NADA, and Edmunds.
Deposit:
Before you give anyone a deposit on a vehicle, be sure you know
whether can you get it back if you change your mind -- or is it gone
forever? Get the salesman's answer in writing before you hand any
money over.
Service contract:
Read the contract from top to bottom then look at everything covered
by warranties and insurance policies. Is there a good chance the
service contract will be needed? Does it cover some unlikely
occurrences that would cost the earth or everyday occurrences that
shouldn't cost too much anyway? Your call.
Credit insurance:
Your lender may offer, or even demand, credit insurance. First, find
out exactly what it will cost you. If you have an existing insurance
policy that covers the same thing, make a thorough comparison.
It's not required by federal law, and check your state's
requirement (through the office of your attorney general or
insurance commissioner) if your lender requires it. If you must pay,
make sure it is included in the cost of your credit and see where it
is reflected in the APR you are paying.
Golden rule of auto financing:
Go prepared. Uncertainty is your enemy, and salespeople are
experienced at recognizing and using it.
E-Loan has great rates:
That's why it pays to have your auto loan in hand before you
actually shop for your new car.
Apply online at
E-Loan
today. It's quick (takes 5 minutes), fast
(you're approved in 15 minutes), and easy (it's a very short form).
Plus, you can't beat their low rates!
Related Pages
Payment Calculators - Choose from seven car loan calculators - Calculate loan payments - Compare leasing with buying - See how auto loan rate and length affect your payments.
Auto Finance Terms - Provides auto finance terms information, car buying tips, auto loan and car loan finance tips, and the best auto financing rates.
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