The No. 1 mistake that car buyers make -- no matter whether they're
buying new or used -- is so simple to avoid. I want to identify it for
you and tell you how to work around it so you can save big bucks.
You might have spent hours researching a potential car purchase thoroughly, but did you do the same when it came to getting your loan? One of the biggest mistakes people make when buying a car is to not arrange financing before they walk into a car dealership.
The Boston Globe reports that 80% of car purchases are financed at the dealership. Dealers are entitled to make money on a loan if you don't do your homework and get prequalified elsewhere.
Credit unions offer interest rates on car loans that can be one to three percentage points lower than other lenders. You may also want to check online lenders. Even your auto insurer may be able to give you a competitive interest rate. As a last resort, I even recommend that you go to a traditional bank.
The real money in car dealerships is made in the F& I (finance and insurance) department, where the F& I man (or woman) sells extended warranties and writes car loans.
When you fill out a credit application at a dealership, the dealer goes out to wholesale the money for you. They might get money at 4 percent, but they could write the loan at up to 7 percent or even higher -- especially if they con you into thinking you have bad credit. The younger you are, the likelier it is that you’ll be conned into thinking you aren’t good for the money and they are heroes to get a loan for you!
When you are financing a car, I want you to be sure you never finance for longer that 42 months. Anything longer than that and you risk being "upside down" in your car -- owing more on the vehicle than what it is worth.
author: clark howard
You might have spent hours researching a potential car purchase thoroughly, but did you do the same when it came to getting your loan? One of the biggest mistakes people make when buying a car is to not arrange financing before they walk into a car dealership.
The Boston Globe reports that 80% of car purchases are financed at the dealership. Dealers are entitled to make money on a loan if you don't do your homework and get prequalified elsewhere.
Credit unions offer interest rates on car loans that can be one to three percentage points lower than other lenders. You may also want to check online lenders. Even your auto insurer may be able to give you a competitive interest rate. As a last resort, I even recommend that you go to a traditional bank.
The real money in car dealerships is made in the F& I (finance and insurance) department, where the F& I man (or woman) sells extended warranties and writes car loans.
When you fill out a credit application at a dealership, the dealer goes out to wholesale the money for you. They might get money at 4 percent, but they could write the loan at up to 7 percent or even higher -- especially if they con you into thinking you have bad credit. The younger you are, the likelier it is that you’ll be conned into thinking you aren’t good for the money and they are heroes to get a loan for you!
When you are financing a car, I want you to be sure you never finance for longer that 42 months. Anything longer than that and you risk being "upside down" in your car -- owing more on the vehicle than what it is worth.
author: clark howard
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