Quick Car Finance Review

Understanding how the automobile finance process works should be the first step for anyone thinking about buying a new or used car or truck.  In order to make a well informed car purchase it is essential that a prospective buyer learn about the car models, options, prices, and ratings.  But far too many people go to the dealership equipped with that knowledge and remain ill informed about the car financing and car loan options.  Grasping the ins and outs of vehicle financing will give an individual the knowledge to ensure that the purchasing decision does not negatively impact an individual’s budget, credit and financial goals.

Key items to consider before choosing a vehicle to buy should include:

How much can you afford for the car purchase.  Understandably, the first task is to evaluate your financial situation and determine how much you can afford to pay for a new car.  This requires evaluating your own budget and the costs of the car that match your needs.  Car costs should not only factor in the purchase price and the car loan payment but the costs of insurance, gas as well as maintenance costs.  

Become familiar with what car financing and car loan options are available to you.  This requires comparing car loan rates, annual percentage rates and financing terms from more than one source such as banks, finance companies, and credit unions.  The initial car loan rate you are offered may be negotiable and may be changed based on different factors.

While investigating the car loan options it is helpful to become knowledgeable about what factors affects the car loan rate and finance charge.  Banks and car loan companies use a number of factors to settle on the auto loan rate that they offer.  The most important component is the car loan applicants credit history and credit score.  Other factors that may also affect the financing decision and the car loan rate include:  the applicant’s income, the total purchase price of the car, the amount of the down payment, the term of the car loan and the availability of manufacturer incentives. 

Be aware of the cost of optional products such as extended service contracts, credit insurance and physical car options.  If you don’t want the extra products, look at a different vehicle and don’t sign for the options you don’t need or want.  Read the contract carefully before you sign it and ask questions about anything you don’t understand before committing to a contract.

Understand the overall car cost including the purchase price, monthly car loan payment and total costs over the life of the loan.  Review the car loan APR and any manufacturer rebates given or available.  Know how much the down payment affected the cost whether it is cash or trade in value.  Be sure to review the whole car purchase package that is offered, and not just the monthly car payment.

The auto loan and car finance industry is very competitive, use the resources available and the different lenders in the car loan market for your advantage by comparing the loan terms, annual percentage rates and other important financing factors and not just which car to choose.

Remember that once you have completed the purchase and executed the car loan contract that the lender or bank that provided that loan to purchase the car holds a lien on the car’s title until you have paid the loan off in full.  Be sure to make your car loan payments on time.  Late or missed car loan payments will result in potentially, costly late payment fees and may negatively impact your credit report which will have an effect on your ability to get credit in the future.

Tags: auto loan, auto loan rate, car finance, Car loan, car loan payment, car loan rate

This entry was posted on Thursday, May 14th, 2009 at 9:16 am and is filed under Auto Industry Update. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.