You’ve been toying with the idea of buying a car and now finally you have zeroed into the perfect model. While it fits your personality and lifestyle perfectly, you just have to make it fit your budget. Like most Americans, you will be looking to finance the acquisition. However, not only are there a number of options for you to consider but the competitive nature of the auto finance sector makes it worthwhile to spend some time shopping around for the best deal. Some tips that will put you right ahead:
Dealership Finance: A Good Thing or Is It?
Most auto dealerships will offer finance to customers. This means that you do not have to visit multiple financiers. The dealer will be only too happy to make all the arrangement while you finalize on the model as well as the various bells and whistles. While the single-biggest plus of dealership financing is the convenience, it is typically a high cost option as the interest rates that will be offered to you will be higher than what will be available from standalone financiers such as banks or credit unions.
Surveys have revealed that if you are a member of a visible minority you could be subject to discriminatory interest rates. Many states have introduced caps on the interest that can be charged consumer loans and car loans for buyer protection. Additionally, a cap of 6% on the rate of interest has been implemented by Service Members Civil Relief Act (SCRA) for members of the armed forces. It is a wise decision to find out the average interest rates prevailing in your area before entering into any discussion with the dealer as this will arm you with the requisite knowledge and confidence to protest against any unfair deals offered.
Get Your Auto Loan Approved Before Approaching the Dealership
It can be a very good idea to get your car loan approved even before you start looking at the various models available at the dealership. Remember car salesmen can be really very persuasive and are trained to spot your weaknesses, as a result of which you could potentially be forced into buying a car that you really cannot afford. Today, with all the convenience of the Internet, you can get your auto loan pre-approved from the comfort of your home and use it to drive a hard bargain with the dealer. If he is not able to better the deal, at least you will have the comfort of falling back on your pre-approved loan. Even if you are not able to get a pre-approved loan, then you should make a firm budget from which, you should not deviate whatever be the seductions at hand.
Grab a Rebate Instead Of Opting For a Low Interest Rate
At the dealership, you will invariably be faced with an option of choosing between a cash rebate available from the manufacturer or a loan with a very low or even zero percent rate of interest. Even if the zero percent deals look very attractive, they will invariably end up costing you more. For example, if you are offered a $3,000 rebate or a zero percent loan on an $18,000 car on which a 10% down payment is required, you would be able to save $1,255 over a tenor of four year if you opt for the rebate and apply it towards your down payment instead of taking the loan. Further, the National Automobile Dealers Association has statistics that reveal that only very small percent of applicants of the zero percent loans are approved finally.
Use Your Home Equity to Finance Your Auto
It may be worthwhile to explore the possibility of taking a loan against your paid up home equity, as sometimes the interest rate available can be less than the best auto finance offer, and you may also be eligible to set off the interest payment against your income tax. However, be sure that you do not put your home at risk.
Buying a vehicle can really be quite tricky considering the number of options, high-pressure tactics and confusing terminology that you will invariably face at the dealership. It is best to educate yourself to the maximum possible so that you are able to extract the best possible deal.
Author bio: Dominic Tunney is a sales consultant at a leading auto insurance company. He has extensive experience of working in car dealerships, including Ideal Auto USA.