Buying a New Car? Get the Best Financing Deal.
Unless you are rich
you will need a loan to finance your new car purchase.
You have several options to choose from:
leasing,
bank financing
or dealer financing.
Before applying for the car loan,
there are some important matters that need to be considered.
The interest rates that financing companies offer are not always the same.
So how do they determine the interest rate to approve for your loan application?
One of the important things that they check is your credit rating.
The lower your credit rating, the higher the interest rate you will pay.
Before applying for a loan obtain a copy of your credit report.
Scan the report for possible errors that may makre your rating lower than it should be.
If there are no errors see if you can pay off one or two credit cards to further improve your credit report rating.
Before filing in the car loan application
check the current market price of the car you have your eye on,
also check the current rates of car financing.
Check the depreciation rate on your proposed new car, the lower the better.
The financing companies will give a better deal if the car will hold its resale value well.
After having checked your credit report, and the interest normally paid on loans,
it is time to choose the type of financing you want to go with.
Dealer financing may have higher interest rates compared to other lenders,
but they also have some advantages over the others.
One advantage is having to contact only a single company on both your buying and financing needs,
like the so-called one-stop-shop.
Check if they offer rebates and other good deals.
Once you have got the rebates and the loan approved,
you may be able to have the car loan refinanced through another lending companies at a much lower interest rate.
A good resource to help you decide the right financing for your car is the
Federal Trade Commission’s booklet titled “Understanding Vehicle Financing.”
This can be downloaded for free from the Federal Citizen Information Center’s website.
With this booklet, you will be aware of the different facts of dealer financing,
steps on how to apply for financing, cash back, rebates and other special financing offers.
If you are thinking a buying a car privately,
say from a friend or colleague,
it may be difficult to get a car loan from the usual financial institutions such as banks and credit unions.
But there are other lending institutions
who can grant loans for private sales.
These are E-loan.com and Capital One Auto Finance.
The interest rates, however, for this type of loan are higher than the usual market rate
but may be worth considering.
There are many financing institution to choose from.
Make a short list of all those that may grant you your loan.
Choose the one that will give you the lowest interest rate and best deal you can get.
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