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Financing a Car: Tips, Questions, and Factors to Consider

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According to Kelley Blue Book, the average price for a light vehicle in the United States was almost $38,000 in March 2020. Of course, the sticker price will depend on whether you want a small economy car, a luxury midsize sedan, an SUV or something in between. But the total you pay for a vehicle also depends on a number of other factors if you’re taking out a car loan.

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    Decide Whether to Finance a Car

    Whether or not you should finance your next vehicle purchase is a personal decision. Most people finance because they don’t have an extra $20,000 to $50,000 they want to part with. But if you have the cash, paying for the car outright is the most economical way to purchase it.

    For most people, deciding whether to finance a car comes down to a few considerations:

    • Do you need the vehicle enough to warrant making a monthly payment on it for several years?
    • Does the monthly payment work within your personal budget?
    • Is the deal, including the interest rate, appropriate?

    Factors to Consider When Financing a Car

    Obviously, the first thing to consider is whether you can afford the vehicle. But to understand that, you need to consider a few factors.

    • Total purchase price. Total purchase price is the biggest impact on how much you’ll pay for the car. It includes the price of the car plus any add-ons that you’re financing. Depending on the state and your own preferences, that might include extra options on the vehicle, taxes and other fees and warranty coverage.
    • Interest rate, or APR. The interest rate is typically the second biggest factor in how much you’ll pay overall for a car you finance. APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.
    • The terms. A loan term refers to the length of time you have to pay off the loan. The longer you extend terms, the less your monthly payment is. But the faster you pay off the loan, the less interest you pay overall. Edmunds notes that the current average for car loans is 72 months, or six years, but it recommends no more than five years for those who can make the payments work.

    It’s important to consider the practical side of your vehicle purchase. If you take out a car loan for eight years, is your car going to still be in good working order by the time you get to the last few years? If you’re not careful, you could be making a large monthly payment while you’re also paying for car repairs on an older car.

    Buying a Car with No Credit

    You can buy a car anytime if you have the cash for the purchase. If you have no credit or bad credit, your options for financing a car might be limited. But that doesn’t mean it’s impossible to get a car loan without credit.

    Many banks and lenders are willing to work with people with limited credit histories. Your interest rate will likely be higher than someone with excellent credit can command, though. And you might be limited on how much you can borrow, so you probably shouldn’t start looking at luxury SUVs. One tip for increasing your chances is to put as much cash down as you can when you buy the car.

    If you can’t get a car loan on your own, you might consider a cosigner. There are pros and cons to asking someone else to sign on your loan, but it can get you into the credit game when the door is otherwise barred.

    Personal Loans v. Car Loans: Which One Is Better?

    Many people wonder if they should use a personal loan to buy a car or if there is really any difference between these types of financing. While technically a car loan is a loan you take out personally, it’s not the same thing as a personal loan.

    Personal loans are usually unsecured loans offered over relatively short-term periods. The funds you get from a personal loan can typically be used for a variety of purposes and, in some cases, that might include buying a car. There are some great reasons to use a personal loan to buy a car:

    • If you’re buying a car from a private seller, a personal loan can hasten the process.
    • Traditional auto loans typically require full coverage insurance for the vehicle. A personal loan and liability insurance may be less expensive.
    • Lenders typically aren’t interested in financing cars that aren’t in driving shape, so if you’re buying a project car to work on in your garage during your downtime, a personal loan may be the better option.

    But personal loans aren’t necessarily tied to the car like an auto loan is. That means the lender doesn’t necessarily have the ability to repossess the car if you stop paying the loan. Since that increases the risk for the lender, they may charge a higher interest rate on the loan than you’d find with a traditional auto loan. Personal loans typically have shorter terms and lower limits than auto loans as well, potentially making it more difficult for you to afford a car using a personal loan.

    Steps You Should Follow When Financing a Car

    Before you jump in and apply for that car loan, review these six steps you should take first.

    1. Check your credit to understand whether you are likely to be approved for a loan. Your credit also plays a huge role in your interest rate. If your credit is too low and your interest rate would be prohibitively high, it might be better to wait until you can build or repair your credit before you get an auto loan. Sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.

    2. Research auto loan options to find the ones that are right for you. Avoid applying too many times, as these hard inquiries can drag your credit score down with hard inquiries. The average auto loan interest rate is 27% on 60-month loans (as of April 13, 2020).

    3. Get your trade-in appraised. The dealership might give you money toward your trade-in. That reduces the price of the car you purchase, which reduces how much you need to borrow. A few thousand dollars can mean a more affordable loan or even the difference between being approved or not.

    4. Get prequalified for a loan online. While most dealers will help you apply for a loan, you’re in a better buying position if you walk into the dealership with funding ready to go. Plus, if you’re prequalified, you have a good idea what you can get approved for, so there are fewer surprises.

    5. Buy from a trusted dealer. Unfortunately, there are dealerships and other sellers that prey on people who need a car badly. They may charge high interest or sell you a car that’s not worth the money you pay. No matter your financial situation, always try to work with a dealership that you can trust.

    6. Talk to your car insurance company. Different cars will carry different car insurance premiums. Make a call to your insurance company prior to the sale to discuss potential rate changes so you’re not surprised by a higher premium after the fact.

    Next to buying a home, buying a car is one of the biggest financial decisions you’ll make in your life, and you’ll likely do it more than once. Make sure you understand the ins and outs of financing a car before you start the process.

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      • MrEddd

        A minor disagreement with the author. For someone with bad credit I would suggest buying a new car, but the cheapest model available. Research what the best price should be and make the dealer go with it. Dealers will sometime try to make a credit poor person pay more for the car. No reason for it. Your interest rate will be high but you can refinance it after two years of making timely payments. If a person has financial issues they should not buy any car without a minimum 3 year warranty. When I was having financial problems I bought a new Ford Festiva with no options. The dealer tried to screw me but I walked out. They called back on the next day and gave me a good deal. Car lasted for 5 years with no repairs except tires. Most used car dealers, especially the buy here-pay here ones will screw you over badly and there will be trouble with the car pretty quickly. Good Luck.

        • http://www.Credit.com/ Gerri Detweiler

          Thanks for sharing your experience – it’s helpful.

      • http://www.Credit.com/ Gerri Detweiler

        The issue of auto dealer financing markups at some dealerships (certainly not at all) has been documented by regulatory and consumer groups. For example, the CFPB recently weighed in on discriminatory auto dealer financing mark ups. Consumers are wise to line up financing in advance, and then if the dealer can match it or do better they can make an informed choice.

      • Ken

        Whether too buy new or used depends a lot on the brand and kind of car you are buying. A great majority of the one or two year old cars for sale are retired rental cars with 30,000-40,000 miles on them. The people who bought new personal cars are still upside down and can’t trade in their cars. You don’t want a retired rental if it is a sporty/performance car. Also, powertrain warranties on some brands (100,000 powertrain warranty on Hyundai/Kia,etc) does not transfer to the second owner.
        Also, if you’re buying a car that depreciates slowly like a Toyota or Honda, the premium for buying new is far less than for a fast depreciating car like a Chrysler, VW, etc.

        • Rich

          My credit score is decent, but I went through a chapter 7. I had bought 4 new cars from the local dealership and always had my financing (credit union) in place. Sometimes I would purchase new cars and leave with equity. Went to the same dealership after I had gone through every curse known to man and laid out my finances. I went to the dealer on a Saturday, which I learned is a no no, and got a Malibu from the Honda dealer ship and there would be one person showing me the cars one person going over the paperwork and they were pretending to be soooooooooooooooooooo busy! I left the dealership with a $418.00 car note that lasted until hell thaws out. I called my brother and told him how devastated I was to have been taken. He told me no you think you been taken! I said what do you mean? He said how much do you think the Honda dealership have tied up in a Chevrolet Malibu? and I replied they charged me $18,000 plus a $4500.00 maintenance plan (Because that was the only way the finance company would finance the car) for the 2012 so the dealer must have around $8000-$10000 tied up in the car. My brother told me the dealership more than likely received a fleet of cars from a car rental agency at a rate of between $2000-$4000!!! I figured him nuts until I later looked in the glove box and saw at least 5 yellow rental agreements, and I remembered the salesman asking me if I was familiar with a Cruze? I learned from the lesson and I managed to make them eat the car without bothering my credit, but that was a weekend that I had an ulcer. I know for certain that If a person can keep their car functional the best way to get a car is to purchase it with cash from an individual. And be sure to get it checked out.

          • justme

            FYI- the finance company can never make you buy a maintenance plan…. they screwed ya there!

      • scarhill

        Seriously, buying new is not always bad. The key is to negotiate a good price, much lower than MSRP. As a result, the depreciation hit is minimized. Also, a new vehicle will provide a nice period of no repair bills, a single repair bill on a used vehicle can quickly offset any price difference. Furthermore, when it is time to trade or sell a new vehicle purchased will be worth more than a used vehicle purchased. And finally, for many the feeling of driving a modern, safe new vehicle is worth paying a bit more.

        Number 5 is flat out incorrect. Dealers always have numerous financial sources which the buyer may not have. I have always found dealers are able to provide a lower interest rate than I was able to locate on my own. The key is to research the interest rate for which you, the buyer, can obtain from your bank or credit union. With that knowledge, it is always wise to allow the dealer an opportunity to beat the rate. Example, I recently bought a new vehicle, new not used. The rate I got from my bank was 2.25 percent. The dealer was able to offer 1.8 percent. Interestingly, the dealer’s financing was from my bank.

      • http://www.Credit.com/ Gerri Detweiler

        Thanks for your insights Jeffrey. I have to say that when I bought my last car couple of years ago it was hard to find low mileage used vehicles for a good price; apparently they were quite in demand at the time and people were holding onto them rather than trading them in. But that may be shifting again as the economy has improved and more people are back to buying new.

        • Elkdag

          I just bought a new car. Did not want to buy another used lemon and end up having to sink money into it. Buy new…less worry.

          • Dialn911

            if you research your vehicle, you wont get a lemon.

        • kjsippel

          Gerri, I think that you were hitting the used car market just following the “Cash for Clunkers” program, which effectively induced an intentional market scarcity in the used car market. Even though the used car you were looking for almost certainly qualify for “clunker” status, it seemed as though the people who took advantage of the program where they wouldn’t have ordinarily. My observations are largely anecdotal, but seem to be confirmed by the phenomenon.

      • NewCarBuyer

        “Always buy used” is one of those sweeping generalizations that never worked well for me. I have purchased both new and used. My best experiences are with purchasing new and driving the car as long as it will last.

        • Joe Schmo

          I think the key here is to buy lightly used. Purchase a car that is about 1 year/10,000 miles in at a price you can reasonably afford. Doing that, you basically get none of the used car headaches, as well as purchase the car after its biggest initial value drop when it rolls off the lot. I have no problem with people buying brand new, but to me it feels like throwing out several thousand dollars for the satisfaction of it being brand new, without any real tangible benefits.

          • Seth Cunningham

            Bad idea. Most of these cars are obtained in less-than-desirable means, i.e. repo, hail damage. What you’re looking for is a 2-4 year old car with average miles. Lease returns are really where the rubber meets the road.

      • http://www.credit.com/ Credit.com Credit Experts

        We can try. While the monthly payments would be the same, you would own the less-expensive car in three years (and thus be payment-free in years 3 and 4). Now, imagine that you continue making “payments” to yourself. At the end of five years, you would have a car, plus a good bit of savings toward another one. OR you would have a $25,000 car now worth substantially less than that. (Your 16K car would also be worth less, and some cars hold value better than others.) Another consideration might be insurance premiums or gas mileage. Those affect your monthly cost of driving, as well. But a salesman might ask you what monthly payment is comfortable for you — and you could find yourself with eight years of “comfortable” payments, because you were looking at that rather than total price.

        • Sal

          Do Not ever buy a car from a dealership , you pay some stupid charges dock fees ,To start with.I have worked for dealerships and know what I am talking about .They also make money off you for financing the vehicle .Do your own research on line.Look for kelly blue book and black book to find out the real value of the car.Most dealerships get the cars they sell from trade ins or the auction .Which they have public auctions you can go to. Find a friend with a dealer license and go buy you a car.Buying new is the worst thing you can do and financing for more than 48 months not smart because of the interest you pay and cars depreciate from the second you drive off the lot that is for new cars.Go to a credit union better interest rates and buy from an individual finance for four years do you homework.Run a car fax on the vehicle .get a mechanic to go with you and pay him to check out the vehicle for you. You will be happy with your purchase and save thousands if dollars. Done this many times never got a bad deal or a bad vehicle .Let the dealership pay their own dock fees.You keep laughing all the way to the bank.Like I said worked for several dealerships and did well just got tired of all their bull that goes with it.I am a successful business man today that is the way I do it .Everyone comes out happier and gets a good deal .Stay away from dealerships and new cars and dealership financing .
          good luck .

      • http://www.Credit.com/ Gerri Detweiler

        You can try Consumer Reports and Edmunds.com. In addition, you may be eligible for a car buying service through a membership such as Costco or your credit union.

      • robert

        How many time can my car loan be sold to other finance company?

        • http://www.credit.com/ Credit.com Credit Experts

          We are not aware of a limit.

      • http://tomzickell.com Thomas Zickell

        Agreed when it comes to rates for purchasing a vehicle you can lose never top what the manufacturer of the vehicle offers I could only do better than BMW financials pricing with if I were willing to jumping through hoops and because I have used them so much in the past I would rather stick with the same company anyway. What I’m getting at is car manufactures have huge incentives especially around the new year.

        I like to lease vehicles however what you said about new cars is true. You can get a certified preowned vehicle with probably a better warranty from the factory and do just as well. But the vehicle will not be worth as much when you go to sell it because it is not a one owner vehicle.

      • Peter Lewis

        Not much use if one is after a newly released model that is so new it’s not in the showrooms yet.
        Buying nearly new makes sense, but finding the right model with the right spec can be very tricky.
        Obviously you lose quite a bit driving a new car off the dealers forecourt, but at least you know the cars true history.

      • Bluffguy

        ALWAYS take the rebate and go through regular financing.

      • Collings290

        Another KEY POINT not mentioned is that dealers may typically run your credit score multiple times!!!! This is (usually) BAD. The more you run your score, you will lower credit score, sometimes by 20 points. I believe the factors used to calculate by the credit houses, which are closely guarded secrets, include the thought that the more you have your score run, the more credit cards or major purchases ( in other words Debt) you’re seeking to take on. Not a good thing in general.

        • Don Pease

          I know this was from two months ago, but I just want to clarify that if you are actively car shopping, the credit bureaus will delay factoring in car/house/school loan inquiries for 30 days, meaning as long as you don’t take longer than a month to find that car, you don’t have to worry about those inquiries affecting your chance at getting good financing. Obviously the inquiries will hit after the fact but at that point you’ve hopefully already purchased a car, and inquiries are generally a short-term effect on the score itself, even if they stay there for two years.

      • NoDeal

        NoDealer

      • NoDeal

        If you actually run the numbers for items involved in owning a vehicle it is never a good idea to purchase a new vehicle. Add up the cost of the vehicle, sales tax, dealer fees, finance cost, repair and maintenance, insurance, state excise and registration fees for both a new vehicle and a used vehicle. Then deduct the resale value of the vehicle. You can run these comparisons on any interval i.e. 3 years, 5years, or 10 years. If you purchase a used vehicle with 80,000 to 100,000 miles vs a new vehicle you will end up spending $8,000 to $10,000 more for the new vehicle.
        That is more than enough to cover an unexpected transmission problem and I still come out ahead by $5,000 to $7,000. Thankfully there are people that like the smell of a new vehicle.

      • Tlyman

        I have a idea, if you can’t pay cash for the car, DON’T BUY IT!! Just because you want a nice car to keep up with the Jones’s does not make it right. Save, buy a car with cash. Save more, sell or trade your car and add cash buy a better car. Guaranteed you will never have to every worry about interest rate or being upside down with this method!!!!!!

      • Jonson

        I’m looking at a new car, a Subaru. Round numbers the car costs 20k new. I could get one that’s two years old with 35k or 40k miles on it for around 17,000. I could buy a 5 year old model with 100k miles on it for around 11k. I plan to get 200k miles out of the car–maybe a little more. Why would I spend more than half the price of a new car on a car whose life is half over, when I only get to enjoy the worst half of the car’s life. Seems to me the person who buys the car new gets the best deal.

        • RgR

          At 20k, you’re absolutely right. No consider a 230k S65 AMG, after 5 years is 79k – see the difference here?

        • Joe Schmo

          A 2 year old car with 40k miles on it, with only 3k knocked off the new price is a rip off, regardless.

      • Lindsey

        I bought a used Mustang and paid most of it in cash, but left about $1000 just to build my credit a bit more. The dealership not only wanted 14%, allegedly because of my credit rating, which was already good, but also added $500 for “administrative fees” which I didn’t notice until AFTER I had signed the contract. I had taken a workshop on what and what not to tell these car sharks, but absolutely missed that one by accident. When I questioned them, I was told that $500 was for their “Christmas party”. I asked to speak with the manager and was told her was at lunch. I was made to wait over 30 minutes until he came back from lunch and then spent another 30 minutes trying to get him to explain the $500 charge. He accused me of being “defensive”. I told him he was the one being defensive, as he wouldn’t explain that charge to me. He finally admitted it was, indeed for their Christmas party and bonuses. They also wouldn’t allow me to test drive the car except on a road where the speed limit was 45 mph. I later (too late) figured out why. I should have torn up the contract and made them do it over, but I didn’t think, once I’d signed it, I could do that. If I had it to do over again, I certainly would, because I had told them how much I would give them for the car. It was simply a sham to avoid calling it “dealer prep” which is no longer allowed. NEVER give them your payoff on your current vehicle; DON’T let them know if you have a trade-in, get the best price on the car you want to purchase FIRST, then deal on the trade-in off of that price; NEVER give them your Social Security number, because they will run a credit check on you in a heartbeat; DON’T tell them how much you can afford or what you want your payments to be because that is exactly what they will sell you and then some. My daughter had two instances where (1) she was leasing a car and she hadn’t even driven it yet (!) until I went with her to make sure she read the fine print before signing on the dotted line (they hate it when they have to sit and wait for you to read the contract) and I found out what they were doing (she wasn’t 21 yet); and (2) she walked in to inquire about a price on an SUV and the salesperson immediately wanted to know her Social and her payoff on her current vehicle. Fortunately, I had taken the workshop and was able to let her know what not to tell them. When they asked her something she shouldn’t tell them, I would touch her knee. Those salesmen went running to their manager!!!! They were not happy with me being there. They watch for people to walk in that have STUPID or SUCKER written across their foreheads or on their shirts. DO YOUR HOMEWORK!!!!!

        • LB

          Very insightful! Thanks for posting…I have to turn in my lease July 1 and am looking at buying used.

      • Common Sense

        The worst mistake is that people buy grotesquely over-sized vehicles that neither they nor the roads need, and which they then can not maintain nor operate properly.

      • Homer

        Completely disagree with #1 in this article. With a used car you lose your manufacturing warranty. You also are subject to higher APR’s depending on the year of the car and your credit. Also, because of the economy, used cars are not as cheap as they were. An SUV with 100k miles on it can still run anywhere from $10,000-$15,000. Sure you can by a strip down something for cheap, but is your used car dealership being honest? I just went shopping and found a Pathfinder 2008 44,000 miles and fully loaded. Upon my further inspection, I found chipped paint and rust on top of the vehicle that “they didn’t know about, but thanks for bringing that to our attention”. Sure, what other goblins am I going to find under the hood.

        The warranty is HUGE. Cad converter is $800-$1000 to replace, AC=1000, Tune up=199, radio (Factory most expensive) = $800-1000. Drivetrain warranty after 100k miles…gone. Transmission, $1500-3000. Plus with a used car, you still have to keep up with tires, shocks, etc. It’s not like that just goes away because you buy a used car. In the end, it’s a wash. Just be smart, and focus more on what you need and what % of your monthly budget can be used for your car payment. Cars are like boats, money pits. You don’t win either way. Just be smart.

        • nosugarshane

          That’s completely wrong. The manufacturers’ warranty stays with the car until the it goes past the term or mileage limit on the warranty. The number of owners is not relevant.

      • frisker

        i disagree with number 5. i buy mercedes automobiles, and their financial services outperforms the auto loan market for low rates. I can get a 0-3yr. old used benz from a mb dealership and get financing for as low as 2.99% for up to 72 mos. My last car finance from them was 1.74%

        • http://www.credit.com/ Credit.com Credit Experts

          Good to know. Thanks for sharing. However, we think it’s always a good idea to know what your options are (and to have some idea of what your credit profile looks like and how likely you are to be approved).

          Thanks for joining the conversation.

      • Ken

        Being a share holder of Ford stock I receive nice discounts on new Ford products. Price on same 1 year older model with 7000 miles was $600 less.
        Dealer financing on New Car was 48 months at 1% plus $1000 rebate. Loan was required to get rebate. Could be paid off early $50 minimum processing fee. Used car rate was 4% interest no rebate. Figuring the total cost of ownership along with 1 year less on warranty buying used would have cost me more.

        Something to think of is setup a replacement car bank account. Continue to make payments into the new account. A plus is you are used to making this payment the money is not missed. When you need to replace that car you have some if not all of the money saved.
        I had saved enough to pay cash. I fook the loan for 60 days paid the $50 proceeing fee. I was $950 ahead of paying cash for it.

        • http://www.credit.com/ Credit.com Credit Experts

          Good for you. There are exceptions to almost every general rule — and running the numbers for yourself is the best way to know for sure.

      • J-Dub

        OK, neither of these is correct. Have the dealer show you the print-out of the full “deal structure” showing the rate you have from your credit union (get pre-approved before you go to a dealership) and the incentivised rate (0% or whatever). Or, as some car companies do, their standard rate with rebates. Then you decide. What you’ll notice is that there will be little difference. It’s math. If the dealer won’t or claims that it is unable to provide you with these comparison numbers then it’s time to go somewhere else.

      • J-Dub

        And the reason is that you had an established relationship with your credit union. Credit union financing has a different set of rules for loans and rates than conventional financing sources. The rate quoted you by the dealership was not inordinately high at 15.9 for a 600 score. I always recommend that you shop for your money before you shop for your car. They are both “products” and they are both part of the negotiation. And, I would maintain that a reputable, new car dealership with a manufacturer’s logo over the door is NOT “hosing” you at a higher rate. A dealership is allowed to “mark-up” a rate in order to improve profit. There is nothing either illegal or wrong with it. Dealerships work on slim margins.
        The biggest danger is for a customer like Samuel to invoke previous purchases, rates, etc. Rates change due to economic conditions, credit strength changes, incentives change, etc. Don’t be so arrogant that you think you know it all. I see customers all the time who either can’t do or refuse to do 4th grade arithmetic such as multiplying $300 times 72 and expecting to get a $25,000 car with $1000 down–you can’t do that even at 0%.

      • BayronPosas

        Here in Texas the dealer can markup rate 2%. Your credit sucks even if they gave you that 2% your rate is still super high. Pay your bills on time and make sure you fulfill your debts then you won’t have that problem.

        • Dialn911

          its not always that simple. I had good credit and worked as a police officer. Then I was hurt on duty and later found out I had Chrons disease. I lost my house and had no income for several years before being granted disability. COnstant hospitalizations and medical destroyed my credit. I have a perfect payment track record for my credit cards, car loans, etc. but still destroyed credit from all the other issues.

          For many, its much more complicated then not simply being careless. Sometimes situations beyond our control destroys our credit score even though we have good payment history otherwise.
          It’s too bad that portfolio lending is a lost art.

      • Christian Winbush

        My credit is bad , what should I do ?

      • Gina Love-Aguilar

        I’m a woman who knows nothing about fixing a car. Especially these computer operated vehicles of today. I always buy from dealerships and I always buy lightly used cars. I have been blessed enough that the cars that I select do not need repairs, for the most part, but if they did, I have the peace of mind to know that I am always covered by an extended warranty plan. This to me is worth the relatively high price. Although I only paid about $2,600 each for my last two warranties, they are worth it, I think.

      • http://www.Credit.com/ Gerri Detweiler

        This sounds questionable. Read: CFPB extended warranty questions.

        • dk

          Now they are saying they had to mark down the price of the SUV to get the loan Agreed to 9500 they had to drop it to 8900-1000 I put down 7900 but they still have not answered why I was told by the finacial officer that the extended warranty had to be included i also find it strange that before I even agreed to buy it the sales man came to me and said we are looking at mid 250s for 60mths i am going back Thursday any advice they said they will drop the EW but is there anything else they might try to pull? Will the bank cancel the loan they gave me? Any info apprecited

          • http://www.Credit.com/ Gerri Detweiler

            Please talk with a consumer law attorney with experience in auto lending. They are in the best position to review your documents and tell you want your rights are, as well as suggest how to proceed. As much as we’d like to help, this is no doubt a large amount of money and in my view it would be well worth it to get a consultation (which you should be able to do for a reasonable cost). Visit the website of the National Association of Consumer Advocates where you can search for one locally.

      • ddm1959

        First of all, if you have negative equity then, you need to get off the lot until you pay off your old debt, then consider purchasing a car with cash only later.

      • Dan

        Sounds like someone works for a dealership. As a former auto loan analyst for one of the top auto lenders, here’s why you should buy from a dealership:

        1. Manufacturer’s finance divisions (i.e., Toyota Financial) have the lowest rates most of the time. When you go through a dealer, that financing is available to you.

        Here’s why you SHOULDN’T go through a dealership:

        1. Dealer’s compare rates among banks, but have little to no motivation to give you the best rate. Why? Because

        a. Banks pay dealerships to send them loans. For example, Capital One has a program which gives kick backs to dealers for giving them your loan

        b. Banks let dealers charge a rate higher than what the bank offers, then share in that rate hike. It’s called Participation, and banks and dealers are in trouble because it’s known to be racially discriminatory

        2. Dealers often use this as a tool to pretend to give customers great deals. This means you get a great price on the car and a horrible rate, so in the end you pay more than MSRP and a standard loan rate

      • kristina smith

        This is not accurate. Generally the interest rate was better than what I could get at my local credit union or bank. Plus LOCAL service beats an automated teller every time! You can easily save yourself lots of running around by just letting the dealer know what you can get and seeing if they can beat it. No brainer

      • Jackalope

        Some good points if we’re talking generalizations, but there are specific cases where the article is wrong. For example, purchasing a new vs. used Jeep Wrangler Unlimited. The resale value on these cars is so high that people are paying 80% of the price of a new one for a used one five years old with over 100K miles. In this case, new is a much better choice than used. So when doing all this online research, one thing that should be carefully researched is resale value of previous models. Luxury cars, for example, drop like a rock. One of the best buys on the planet is a $100K luxury car that’s about five years old. Frequently (because these buyers have multiple cars) you can find a very low mileage example for a song…allowing you to drive top of the line for budget prices. But the flip side is very high resale cars from Jeep, Corvette, Porsche, etc. where you’ll pay a ton just to get in a ten year old clunker.

      • Clement Joshua

        One trick I have always used when buying a used car from a dealer, after researching the vehicle of course, is to buy it with my American Express card. The advantages to this are many, but one is, if done right, is an interest free loan. Another is the car is yours, you hold the pink slip. Now, you may be asking, How do I pay the AMEX at the end of the month when that comes due? The secret here is to transfer the balance to a 0% offer on another card. You have to be aware of closing dates on your cards and if done right, your first payment isn’t due for about 4 months. The payment may be higher for the months you pay off the credit card, but only for a year to a year and a half, Compare this to a car loan for 36 months or more. It takes some planning and discipline, but you save a ton of money and if all goes really bad (you won’t let that happen, right?), the car is still yours and can’t be repossessed.

      • James

        I traded a truck that the payoff was 44000 I got a car that with me being upside down us about 40000 I got a check from ford for 4000 as a refund is it mine

        • http://www.Credit.com/ Gerri Detweiler

          It sounds like it but I can’t say for sure. Proceed carefully.

      • Net Auto

        Great advice! Buying a slightly used car can save you thousands of dollars upfront. Always make sure you get the best deal for your situation!


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