Borrowing with smarts (part 3)

Automobile Financing

Like investigating the kind of car you want ahead of time, you also want to check into your financing options before you decide how you want to pay for your automobile. Before you even head to the car lot, call around to 2 or 3 different banks or credit unions to see about their financing provisions. Find out what rates they would offer you specifically and compare their offers. This will give you a good idea as to what the going interest rates are.

Dealers also have a selection of sources that will loan you money toward your new car. If you do not know what other terms are available to you, you may very well accept a loan from the dealer at a much higher rate than you might have been able to get at a credit union or other bank. Always ask the car dealer about the financing terms you are being offered and question them if the rate is higher then the rates you were quoted at the banks. You would be surprised at how many people just walk into a dealership and buy a car at the terms they are given no questions asked. Borrowing with smarts will save you so much money. Ask questions and challenge the answers you get.

Rebates

Many times, the hardest choice is when you are provided either a low interest rate or a rebate on an auto purchase. Usually, it is hard to tell which way you get a better deal from. You may need to have the dealer or a banker make a few calculations for you. First, inquire about the payment amount and duration of the auto loan with the low interest rate. Multiply out your total payment. So, if you have a 4 year loan and the payments are $350 – then you will pay $17,200 in total.

After that deduction, ask about the payment amount and length of the loan if you use the rebate towards the purchase price. Multiply out your total payment, and you may find that it is less than using the lower interest rate. The dealer is expecting you to take the cash and spend it for another purpose. If you can find a fairly low rate at your local bank or credit union, it might make a lot of sense to apply the rebate to the purchase price of the car and borrow the rest. Always we aware of your options and exercising them at all times. Again, you would be very amazed at how many people don’t consider their options when buying a car.

Trade Ins

If you are trading in a car, things often get a bit obscure when trying to agree on what is fair and what is not. Some car dealers may offer you more for your trade in, and then not discount the sticker price of the car you are looking to buy. They usually take from one to give to another if you know what I am saying here. If they offer you $1000 more for your trade in that they will usually take $1000 from any discounts from your purchase price on the new car. Be aware. You want to agree on a price for the new car before you even reveal that you may have a trade in. Although, this is one of the first questions a dealer will ask you as they are meeting you in the lot. Just be vague until you get an agreed price on the car you want o but, then enter talks about a trade in. You can get an idea of the trade in value of your car through Consumer Reports. This is a tricky situation and you have to stand your ground. If they will not offer you a fair trade in value after you have agreed on a purchase price fro the new car, you have to stand your ground.

Just by taking these steps alone will help you borrow with smarts. By doing this, you will be able to buy the cheapest and most reliable car that will suit your specific needs with the best possible terms you can get for financing. As we touched on in the previous section, stay away from 6 year loans. You want to take the shortest loan duration terms that you can find conducive to the payments you can afford each month. The shorter the loan, the less interest you end up paying.

Again, Consumer Reports is a very handy tool for investigating all the different aspects f buying or leasing cars. This report has all the latest car reviews, values and much more. It is worth spending the money this manual costs as it will pay for its self ten fold with the money you will save by knowing all you need to know about car buying.

Be sure to read on about the next debt free article section about borrowing with smarts. The next article covers planning ahead for you next car purchase.

Part 4 – Planning Ahead for Your Next Automobile…

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