Guidelines For Auto Finance

People have been buying cars in a big way, and the rising demand for cars has been rather strong since last year. However, most of us can also not afford to pay the lump sum amount that a car is worth, so the rise in new car sales has also lead to a surge in auto financing as well. Of course, you may not have as much fun when shopping for an auto loan as you do when shopping for a car itself, but the truth is that you may not be able to buy your dream car without financing. Therefore, you should follow the guidelines below to make this important decision that will decide whether or not you will be driving away in a new car.

Be Aware of Your Credit Situation

If you are in the market shopping for a new car, make sure you do not apply for a loan until you have reviewed your credit reports from all three major credit card bureaus. According to a recent FIDC consumer newsletter, one or all three free annual credit reports can be obtained by visiting annualcreditreport.com. Any mistakes in the reports should be straightened out to avoid paying a higher rate. Keep in mind, no matter how good your credit is, you will never qualify for 0% financing.

Shop Around

Avoid getting your auto financing from the dealer at all costs. Before stepping inside a dealership, make sure you have been preapproved. Check out banks and credit unions in your locality. Dealers have the legal permission to add to your interest rate as a means of compensating themselves, as a result of which their profit is hidden from the buyer. Therefore, getting quotes from multiple lenders will allow you to find out who is offering you the best rate. If another lender has already preapproved you, this can also be used as a bargaining chip when an APR is offered by the dealer.

Avoid Getting Upsold

Since the public has become better informed and they compare prices on the Internet before they step into the showroom, so dealers are now making lesser profit margins on actual cars. So, once buyers take a seat in the finance office, sellers try making up for this by pitching ancillary services and relying on their service departments. Dealers tend to earn almost 50% of their profits from the finance office. Therefore, no matter what you are told, avoid deciding whether or not you need things like extended warranties, gap insurance, rust proofing, undercoating, etc. while you are in the financing office.

Avoid the Yo-Yo Trap

There is a bait-and-switch tactic that tends to take in many unsuspecting car buyers, in which “conditional” financing is offered so a new car can be taken home on the spot. This is known as a yo-yo scam. Accepting such financing may make you think that the deal is settled and you now have a new car. However, days or weeks later you will receive a call informing you about a problem with your financing, and that you need to forfeit your car or pay a much higher interest rate if you want to keep it.

Shopping for auto financing is not only important, it is also not as easy as it may seem, so you should be prepared to make the right decisions. You should be even more wary if you are buying your first car, and if you do not even have a license yet, you should dial the DVLA contact number and apply for a license before you go shopping for a car.