Getting an Auto Loan Without Getting Burned
A Credit Article Contributed by Cathy Wilson
Getting an Auto Loan Without Getting Burned
Ya gotta drive, right -- so you gotta have a car -- so that means you are going to have to get yourself an auto loan. Most people don't have the kind of financial flexibility it takes to buy a car outright, even a used auto.
Financing Your Car -- Your Auto Loan
It's actually easy to get money to finance a car, but just as with credit cards, there are many deals out there and you can do well by yourself or get totally screwed with an auto loan. Three-fourths of all new cars and trucks are financed with auto loans, and used cars are frequently financed as well. To get a good deal on an auto loan, however, you need to do some preparation before you actually arrive on the car lot.
Going Prepared with Your Auto Loan
The easiest way to finance your new car -- and certainly the best way to get the ideal rate -- is to get an auto loan from a bank, credit union or similar lender. You can have your auto loan approved before you ever hit the lot (a major plus in most deals). If you're a member in good standing in such an institution, the best thing to do is to browse through your possible choices and make a few notes. Decide what vehicle you'd like and see what it costs.
Take this information to your bank or credit union and have your auto loan pre-authorized. This way will generally give you the lowest rates, and credit unions are generally lower than banks.
Auto Loans from the Dealer
Popular wisdom tell us that these usually have higher interest and are a worse deal, but it is not always so. Sometimes "no money down" and "must clear inventory" mean just that. The only way to know for sure is to do some preliminary shopping. If you can swing a super deal for your auto loan, you'll be that much ahead.
Help from the Home or the Family for Auto Loans
One other choice is to dip into your home equity. This will give you the best interest rate and all your payments will be tax deductible. Just make sure your loan won't put you in danger of losing your house. It's not worth it, just for owning the car of your dreams. Get a lesser vehicle if necessary. If you really cannot find the money you need for a car, someone in your family may loan you money or co-sign for a loan. Just make sure everyone involved knows what is at risk. You don't want anyone to come out on the losing end of the deal if you can't make a payment.
New or Used Cars and Auto Loans
Believe it or not, the interest rates on new cars are often lower than on used vehicles. And usually new cars are financed over longer terms than used cars. This can turn out to make a new car cheaper than a used one.
Do Your Homework in Auto Loans
Bottom line: do your homework. Use the internet to figure out the best price for a car and utilize your community network, especially credit union membership, to finance your car.
