ALT-1 The most Important Tips for Financing your Car
An automobile is usually the second most expensive thing we buy. I say usually because there are a few other things that do cost as much or more. One example is college expenses for your children. But for the average person, the automobile is number two on the cost list. Of course the most expensive purchase most people make is their home.
People finance cars usually for one very basic reason. Money. Most people don't have enough money laying around to just walk into a dealership and flop down the cash for a brand new vehicle. Most of us don't even have the money to lay down for a used vehicle. That's why banks, credit unions, and finance companies have so much money. They loan us some of their money. We pay it back with interest. We get our vehicle. They make money. That's the American way.
Even people who do have plenty of money often finance their vehicles. Why? Often they want to keep their money for other uses. Maybe they can invest it and make more than the finance rate costs them. Or they just don't want to tie a large amount up in a vehicle when they can make monthly payments.
So where does one go when ready to purchase and finance an automobile? Well, logically, the best place is your personal bank. At your own bank, you are generally known, at least to the computer. Although most banks have loan officers for different types of loans, you can still get advice from your favorite loan officer. And if you are a long term customer, you may qualify for a lower interest rate. Ask if you qualify for any special rates.
However, it does pay to shop around. Car loans are no different than any other loans. Different banks and lending centers have different rates. If you find a lower rate than your personal bank, contact them and see if they will match or beat it. It never hurts to ask. And if they won't, go with the cheaper rate. Also check with the automobile dealers to see what rate the car companies are offering to buyers. GM and Ford often offer very competitive rates to get you to finance with them.
Don't purchase and finance warranties and extras you don't need. Many times dealers will try to sell you an extended warranty and add it into your financed cost. You don't need these extra coverage, and you certainly don't need to pay finance charges on it.
If you can afford to pay the sales taxes and license fees upfront, do so. This will keep you from paying interest on the sales tax and fees on top of paying them. It will also help lower your monthly payment.
When you actually sit down to figure out the payments, get the officer to figure them in different ways. For example, get the payment amount for different payoff times. Loans with a quicker payoff time have a lower interest rate. Find out what a forty-eight month loan will be, then compare it to a sixty month loan. True, you will have a higher monthly payment. But the actual amount you save on the total loan can be substantial. But be reasonable. If you know you can't pay the higher payment, then go with the longer loan. You might end up paying a little longer, but you won't have the stress of trying to come up with the higher payment every month.
As with any legal document, and that's what a finance agreement is, read it carefully. If you don't understand something, ask what it means. Make sure the numbers match up before you sign on the line. Know exactly how many payments you will have and the set amount of the payment. Make the finance officer explain all costs. It's your money. You have a right to know what you are being charged for.
