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How should I go about financing a new car?
3 responses Add Yours
i'm thinking it's always a good idea to get pre-approved (thru a big bank, Credit union, neighborhood bank, and/or online) before heading to the dealership, that way you'll have some options.
it also depends on what your credit is. if your credit is good to excellent, you'll want to get as many Loan quotes as possible, because banks will compete for your business, and offer low Interest rates.
however, if your credit is poor or bad, lots of lenders simply won't give you a car loan at all. this leaves you with fewer options: primarily you can get a car loan from a company that specializes in poor-credit Loans, or the dealer's own financing company. the drawbacks with bad-credit car loan companies are that they jack up interest rates, often include hidden fees, and have many consumer complaints against them--i have friends that could tell you some CRAZY stories....
one advantage of financing your car through the dealer is that, because they have their own lending companies, and have a vested interest in lending you money to drive their car off the lot, their terms tend to be OKAY (not great, but not terrible either).
but, whether your credit is good or bad, it's always a wise idea to know what kind of loan you qualify for, and to get offers before you get to the dealer--usually they're more than willing to beat the competition.
and finally, as an aside, you might not want to finance a used car at all. the process of financing a used car can often be just as costly--if not more--as financing a cheap new car. instead, consider saving enough cash to buy a used car outright, or if you need to finance, go for a new car (financing new cars will keep monthly payments low, financing options for new cars are more plentiful--especially with Bad Credit--and you won't have to worry about repair costs that often come with used cars)!
Well, I need to disagree with handstand up there about getting as many loan quotes as possible. You also have to think about the impact it will have on your Credit Report. If those inquiries are close to each other, then it's OK, they won't count against you, but if you spread them out over a few months shopping for quotes, keep applying to find out what different banks offer, it will lower your Credit Score. I would get like 3 quotes inside a month or a couple weeks, to keep them close to each other.
I do agree on the new car buying, though. It's easier to get a Low APR and easier to qualify and resell, and yes, no repair costs...
A dealer may offer you a decent rate on a loan, but on the flip side they probably won't budge as much on the car price. If you're shopping for a new car it's generally best to get pre-approved, then go to a few dealers that have the car you want and haggle about the price w/o getting any kind of lending terms involved. That way you can see who offers the best price on the vehicle, then get that car financed through your bank/credit union/etc...
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