Car Finance
In the world of auto financing, car loans have kind of a bad rap. If
you have great credit, you probably have never experienced it, but just
one little blemish on your credit can greatly increase your interest
rate and your monthly loan payment. And the worse your credit is, the
higher the interest rate is; maybe even up to 30% in some places.
If you have good credit, getting car financing shouldn’t be a
problem. There are many banks, credit unions and even car companies,
like GM and Ford Motor Credit that will be happy to finance your car.
But if that’s not the case, then you might find yourself at the Ugly
Auto Trader buying a piece of junk for a very high interest rate (as you
drive away, look in the rear view mirror – you’ll probably see the
salesmen high-fiving each other).
Here’s more bad news about that: If you are in dire need of a car,
this may be your only option. The best you can do is to make timely
payments to help improve your credit score so the next time you seek out
car financing, you’ll have better options available to you. Not only
will you be able to get a lower interest rate and monthly payment, but
you will also likely get a newer car that’s in better shape.
Congratulations!
TIP: When negotiating with a car salesman, don’t negotiate
monthly payment, negotiate the price of the car. They will
sock-it-to-you if you only go the monthly payment route because all they
do is tack on more years to keep the payment lower. Certainly that
part’s important, too, but you can have a number in your head of what
the payment will be by figuring if you have good credit, the monthly
payment will be around $25-$30 per $1000 the car costs – if the credit
is less than perfect, figure on $35-$45 per month per $1000 that the car
costs. Also, never discuss your trade in until the price of the car is
set – they will just tack what you owe on that to the financing or make
it seem as if they are giving you more than they really are. Fun game,
this car finance, right?
So, to sum it up, if you have pretty good credit, the first
thing you should do is go to a credit union to see how much of an auto
loan you qualify for. This will give you somewhere to start and you’ll
know what to expect and can be in control when you get to the
dealership. If you’re not in a credit union, try a bank. Your last
resort should be financing through the auto dealership because they add
points to the loan (that means they earn part of the interest you pay). |
