subject: Obtaining Auto Financing [print this page] When purchasing a vehicle, some key factors to consider are price, trade appraisal and financing terms. Often times the consumer focuses on getting a bottom line figure they feel comfortable with or work to get the best dollar amount for their trade but neglect to spend any time securing the best financing terms. Not doing due diligence when it comes to getting the best car loan rate you qualify for could wind up costing you thousands more than you needed to spend.
The true cost of a vehicle is the deferred cost, or what your vehicle cost on credit. You can figure the deferred cost by multiplying your payment by the term of your loan and then adding your down payment, trade equity and any rebates that were applied. In the Federal Truth and Lending box on a contract this is done for you.
If you are interested in getting the best deal possible on your next new or used vehicle purchase, shop to find the very best rate and terms possible. You can start by finding an online calculator to help you crunch the numbers. Call around to various lenders you have relationships with such as banks or credit unions and find out what they are offering.
Be careful not to assume you automatically get the rate they quote you first off. The rate you qualify for may be different than the advertised rate they tell you about. The rate you qualify for will be determined by several factors. The first factor to consider is your credit rating. If you don't know your credit score already, find out, it is one of the first things a lender looks at when considering giving you a loan. The better the score the better your rate. A score of 720 is usually high enough to qualify you for the best rates.
Next look at what percentage of a vehicle value they are willing to finance. This is important and may mean you need to put some money down. Remember, banks are taking a risk by financing a vehicle for you, in most cases a vehicle depreciates quicker than you can pay it down. A lender will give you a better rate the less you are financing. Most lenders offer the best rates when financing is below 80% of value. Value is determined by looking at the loan value of your vehicle in the Black Book or in Kelly Blue Book (KBB) Trade equity and rebates both help to bring the amount you are financing down as well.
Finally consider how long you want to finance for. The term of your loan plays a factor in your payment. The longer you go the smaller the payment, but remember, not only will you own your vehicle quicker by financing for a shorter time, you will also get a better rate. When you finance for a shorter term the lender is taking less risk so they can reward you with lower carrying charges.
Take your time and shop for the very best financing you qualify for. Finding the best vehicle financing terms you qualify for will mean truly getting the best deal on your next car purchase.
by: Mike McDonnell
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