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Consumer Service
What's the interest rate I'm really paying?
Are there any possible
penalties in my loan?
What the best thing
to do with my old vehicle?
How much is that car?
What about the deposit?
Should I buy a
"service contract"?
Can I
bring it back if I don't like the car, or the deal?
What about credit insurance?
The
golden rule of auto refinancing?
The single most important thing you can do to ensure you
get the best financing deal for your new car is to ask questions. Lots of
questions.
Once you understand the basics of car financing, write out your questions
before going to the dealer or the bank.
Here are some key ones that are "must ask" questions. And to make
sure you get the best deal and don't get ripped off, make sure you get answers
and that you fully understand them:
What's
the interest rate I'm really paying?
The APR (annual percentage rate) is the best way to know what
interest you are paying. It is the actual interest rate you pay annually on the
unpaid balance of the loan. The rate you are offered will to a large extent
depend on your credit score, a number that dealers get from your credit report.
Are
there any possible penalties in my loan?
Does paying the loan off early entail penalties? Are there any other possible
extra charges that could occur during the term of my loan.? Are there
"hidden charges," which are effectively penalties.
What
the best thing to do with my old vehicle?
The market, not what you think the vehicle is worth, will set the value of your
transportation, be it a trade-in or a private sale. Conventional wisdom says
don't talk about trade-in price until you have settled on a price for the new
car. The trade in is part of the dealing process; don't fail to use it to
maximum value. The dealer may offer you a good price, but then get some of his
money back on your new vehicle financing. Make sure you see where your trade-in
money is being applied to the financing, otherwise, some, most, or even all of
it, might never go to making your new car payments lower.
You'll usually get more selling privately, but it can be more of a hassle. Do
the same research you'll do for your new car -- plus check local used auto
classifieds -- to find out your best asking price.
How much is that
car?
You know not everyone pays sticker price. One way to get the best buy is to know
how to haggle the price down. Dealers may be willing to bargain on their profit
margin, often between 10 and 20 percent. Usually, this is the difference between
the manufacturer's suggested retail price (MSRP) and the invoice price.
Research your prospective buy -- new or used -- and compare it to others.
Arriving at a dealership aware of the price of the car you want to buy is a
major advantage. Some sites that offer pricing as well as other information are
Kelley Blue Book, NADA, and Edmunds.
What about the
deposit?
Before you give anyone a deposit on a vehicle, be sure you know whether can you
get it back if you change your mind -- or is it gone forever? Get the salesman's
answer in writing before you hand any money over.
Should
I buy a "service contract"?
Read the contract from top to bottom then look at everything covered by
warranties and insurance policies. Is there a good chance the service contract
will be needed? Does it cover some unlikely occurrences that would cost the
earth or everyday occurrences that shouldn't cost too much anyway? Your call.
Also, be sure you know the answers to this six-pack of questions before you
say yes to the financing:
What is the ...
- precise (down to the penny)
price I'm paying for the vehicle?
- total amount (be exact) being
financed?
- amount I'm paying for the
credit (finance charge)?
- annual percentage rate (APR)
I'm paying?
- exact amount of each payment?
- total number of payments?
Can
I bring it back if I don't like the car, or the deal?
Once a new car is bought, it's bought. You can't take it back (unless the dealer
is a surprisingly nice person). There are some dealers who do say they'll take
it back. It's a huge plus -- but make sure you get it in writing before you sign
and drive away.
What about
credit insurance?
Your lender may offer, or even demand, credit insurance. First, find out exactly
what it will cost you. If you have an existing insurance policy that covers the
same thing, make a thorough comparison. It's not required by federal law, and
check your state's requirement (through the office of your attorney general or
insurance commissioner) if your lender requires it. If you must pay, make sure
it is included in the cost of your credit and see where it is reflected in the
APR you are paying.
Golden rule of
auto financing:
Go prepared. Uncertainty is your enemy, and salespeople are experienced
at recognizing and using it.
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