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| I want to buy a new car. What should I do about financing? |
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Last Updated
13th of April, 2010
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- Research outside financing before you go into a dealership. Credit unions usually offer the lowest-price auto loans for which consumers qualify, and outside financing reduces the confusing paperwork shuffle that can conceal fraud at the time of purchase. Compare your outside loan offer against any offer you’re made through the dealership. Be sure to read the fine print on both before you decide which is best for your situation.
- Shop for the best loan and loan terms as carefully as you shop for the best sticker price. Be sure of the exact number of payments, the total cost of your credit in dollars, the name, address, and contact info for the bank that holds the loan, and whether there is a balloon payment at the end.
- Don’t give the dealership permission to pull your credit information or your personal information (such as a Social Security number) until you’re ready to negotiate the sale of a vehicle.
- Be willing to walk away. Slow down and read the fine print, ask lots of questions. Negotiate away extras and add-ons.
- Stay away from spot deliveries. Dealers can take advantage of this by inserting writs of rescission in the purchase contract, allowing a customer to drive the vehicle off the lot, then change material terms of the contract later if, for example, the deal is refused by the lender.
- After selecting a car model, call your bank or credit union for a rate quote. Then compare it to the dealer’s quote.
- If the dealer offers zero percent financing, the dealer will not give consumers a rebate on the sale price. Ask the bank or credit union whether it makes sense to take the rebate and finance the purchase at the regular rate. Then compare those calculations with those of the dealer.
- Be aware of the binding arbitration clause in most contracts with auto dealers these days. More and more dealerships are adding binding arbitration agreements to contracts for new and used vehicles, as well as to financing contracts. By agreeing to binding arbitration, you waive your right to sue, to participate in a class-action suit, or to appeal the arbitration decision. Dealerships use these agreements as a way to avoid costly court judgments and often pick the arbitration company themselves. Some states have laws overriding binding arbitration, however.
- Use a down payment and a short loan repayment term to reduce the overall cost of your auto financing, and beware of any prepayment penalties for paying off your car loan early.
Get more information about auto financing and shopping for car loans. You can also apply for an auto loan today!
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