Shopping for a car is generally an exciting event, given the size and utility of the purchase. However, there’s a not-inconsiderable amount of stress that can tag along with it, given that most people can’t pay out of pocket for most cars. This is where auto lending opportunities are essential; and, here is where you’ll learn what to do about them before you car shop.
What is Your Credit History?
This is a very important question, as it will determine the character of the loan you can obtain. To answer it, approach all three of the federally-mandated credit bureaus and request your credit reports from each one of them. The site www.AnnualCreditReport.com can provide them all if you like; or, you can visit Equifax, TransUnion and Experian separately. They are free once per year; after which you need pay just a small fee.
Knowing the numbers will not only position you better when you’re actively seeking a loan from a lender, but there could be mistakes on your reports that are hindering your creditworthiness. Only by using all three as a check against each other can you find and fix them – who knows? You might raise your FICO score as a result of the changes.
Understand the Full Cost of the Car – Not the Payments
What does this mean? This means that instead of focusing on how much you’ll be paying every month, only allow the full cost of the car to dominate your thoughts. This is important because when it comes time to head to the auto dealer, she will try to focus on the monthly payments because they’re so much lower, and easier to get you to pile on services and product.
The rationale is simple: any add-on that you use your loan to pay for is far more costly than simply paying a one-time fee elsewhere (assuming you just have to have it). Remember; you’ll be paying interest on it for years if you let the salesperson talk you into it. It also makes it easier to extend the terms of the loan, which allows the lender to corral more money from you via interest – even though the payments seem deceptively lower.
Have a Basic Understanding of Rebates and Interest
This is easy enough; many auto loan websites have calculators for either cost that you can bookmark on your phone or tablet. This helps you quickly distinguish between low interest and the benefits of a rebate in loan situations where the dealer may be offering you very low financing.
What’s the Minimum and Maximum Rates for Which You Qualify?
You want to know this because, irrespective of your credit score, you may be subject to a dealer mark-up. Your history may suggest that you deserve one right, but they offer you a slightly higher one. Since you’ll be paying down the loan for years, this “slightly” higher rate translates to hundreds or thousands of dollars out of your pocket. By appraising them of your knowledge and the options at your disposal, you’ll tease out more honesty from them. They don’t want to lose your business, so remind them that there’s competition out there if the initial interest rate offer comes back a bit high.
There are many places where you can start in your hunt for an auto loan. Don’t forget large, well-known credit card companies and credit unions; the latter can often save you a bit on the interest rate. For a wider variety of offers, the big banks and the online vendors often come through for people with fair to good credit. There are also many options for those with bad credit, so look around and see what you can find.
