Some time in your life you will need a new car. You may not want to have the burden of a new car debt, but you may find there are very few alternatives. There are some simple things you can look for that will help reduce the amount of money every month. Depending on your credit situation, a car loan can be very easy or rather difficult. Even though there are dealerships that specialize in selling people cars with bad credit, the purchaser must realize what they are getting themselves into.

Get the loan first

One of the greatest advantages you can have over the dealership is to get the loan before you buy the car. You can shop dealerships on weekends and at night and look at the prices and figure roughly that the car will be about 15-25% less than what the sticker says. Go to a bank or lending institution and fill out the appropriate paperwork. Once they give you the loan, you can figure out approximately how much the car will cost you in advance and apply for a blanket price. You can also sign a contract to purchase depending on financing. This means you can haggle your best price and then tell your bank or financial institution how much the car loan should be for exactly.

Dealerships do not want you to bring your own financing. This takes the deal out of their hands. Most dealerships provide finance departments who are more than willing to lend you the money should you meet their credit requirements. An average car loan can cost the consumer between 7 – 15% depending on their credit rating, financial history and ability to repay the loan. Some dealerships offer teaser rates at 0% financing. A chosen few people in the world can actually get these rates. If you are not careful, you can find yourself paying double for the car loan.

Using dealership financing

You may be pressed for time and have credit issues that make it difficult to get qualified at a bank. Your best option should you be able to get a car loan is read the fine print. You should know the exact dollar amount you are paying before you sign a sheet of paper. Dealerships can be sneaky and try to extend the life of a loan at a certain payment to get you interested. Should you only want to pay $200 per month, the car loan for five years would be $12,000. A dealership will try to finance the deal to go to six, seven and even eight years in length! That would mean a car that would cost $ 12,000 could run up to $19,200. The downside to longer payments is that the cars value could be worthless by the time it comes to buying another vehicle.

This entry was posted on Thursday, April 14th, 2005 and is filed under Automotive, Debt Management, Financial Planning. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.