Consumer’s Guide to Available Car Financing Options

The time has come to purchase a new car. Perhaps your old clunker finally gave out, or maybe it is finally time to trade in that gas guzzler for something with a little better mileage. Why there is need to get car is not as important as how you will manage to get the loan financing. There are basically only three ways to get a car. Buy a used or new one outright with cash, get a car loan through dealer financing or some other sort of car loan financing or lease a car. There are advantages and disadvantages with all three ways. Chances are most people do not have a ready supply of cash to purchase a new vehicle outright. This is where loan financing will come into play.
Before you even start to look for the new vehicle take some time to do some research. First thing to do is request a copy of all three credit reports. This is what the car loan lenders will look at to make the determination if they will even be willing to lend the money for a new car loan. It is very important to know what the auto lenders know. Be sure to get the credit reports that include the credit score option. If the overall credit score is low and there is time to try to clean up your credit report try to bring the score up to 680. The idea is to keep the debt to income ratio below 30%. If you have several credit cards or loans open be aware that the total amount of the limit can be considered against you even if your cards are not maxed out. Remember those fantastic deals on television with 0% auto loan financing? These usually have very small print that says a borrower has to qualify for that loan rate. If your credit is less then stellar that probably isn’t going to be the loan rate that you get.

If you currently own a car, you might want to take the time to research the blue book value if you are considering a trade in. If you have the time and the ability you might end up a few dollars ahead if you sell you own used car outright. Consideration has to be given on the amount of work the car may need, mileage, demand and overall condition of the auto. By selling your car outright , the funds you receive can be used as a down payment on the car loan. This will decrease the future monthly loan payment amount, and possibly the length of the loan.

Research the cost for auto insurance on a new car. You might find that it would be to difficult to cover the car loan payments and the insurance both. Also research the car loan rates of competing lenders. Consider your credit union or your bank for an auto loan. By knowing what is going on in the market you are in a position to negotiate a good rate on your car loan. Be informed about what type of promotional deals are available so you realistically know what to expect when the time comes to sign the car loan paperwork.

Beware of the “subject to financing clause” that might be in the car loan papers you sign. It is easy to think once you are at the point of signing car loan papers that it is a done deal. Maybe not! If there is a subject to financing clause the deal isn’t closed till the actual loan financing goes through. Make sure you take the time to completely read any additional paperwork you are asked to sign after you fill out the original car loan paperwork. What looks like a better deal might actually not be.

Forget the extras when it comes time to sign the car loan. Do you really need to pay 18% on a new stereo system or on an extended warranty? These are items that you can purchase separate from the car loan at a later time. Many of the extras that a dealers offers are very nice, but by taking the time to shop around you can save yourself hundreds of dollars in loan financing. These purchases can usually be made in cash at a later time which will not stress your credit limits more then they need to be.