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CNB Provides tips for BUYING A CAR THROUGH AN AUTO LOAN
Buying a car can be exciting, but don’t lose sight of how you will pay for it. Here are our latest tips on financing a vehicle through an auto loan.
Review your credit reports long before you go to purchase a car. Correcting inaccuracies, such as an erroneous history of late payments, can help you get the best loan possible. Fixing mistakes may also save you money on car insurance.
To request free copies of your credit reports, go to www.annualcreditreport.com or call 1-877-322-8228. This is the only authorized site to obtain your free credit reports.
Consider getting pre-approved for a loan from at least one financial institution before you go to the dealership. A financial institution, such as one where you already have an account, may offer you a better interest rate than what you get offered through the dealership. And, don’t share with the dealer the interest rate you’ve been offered in case you want to explore loan options at the showroom.
Consumer advocates also suggest that you not even tell the dealer whether you’ve already been pre-approved for a loan until after you’ve negotiated the purchase price. That’s because some dealers may be less flexible on the price of the vehicle if they don’t expect to make money on the financing.
Don’t hesitate to seek different financing offers. You may be surprised by how comparison shopping for an auto loan can save you money. While submitting multiple loan applications generally can slightly lower your credit score, those for car loans made within a short period (such as 14 days, according to some credit scoring models) generally are grouped together to minimize the effect.
Compare loan offers based on the Annual Percentage Rate because the APR includes certain fees as well as the interest rate. The size of your monthly payment is important, but resist attempts to focus your attention on the monthly payment instead of the APR. Remember, the APR reflects the true cost of the loan.
The longer your loan, the more you pay in interest. Long-term loans may lower your monthly payment but you will pay more in interest over the life of the loan. You may even be offered a loan that is longer than you expect to keep the car.
Keep good records of your loan quotes. Before signing on the dotted line, review the loan agreement (the contract) and make sure any potential fees, the interest rate, and other key terms match what you were initially told.
Don’t allow anyone to steer you toward a larger purchase and a bigger loan than you will be able to comfortably pay. In addition to your monthly loan payment, you need to budget for the cost of auto insurance, licensing fees and taxes.
Leave the car at the dealership until your loan terms are finalized. If a dealer offers you a “contingent” or “conditional” loan agreement and lets you drive the car home, the loan terms may change and be less advantageous for you when you return to finalize the purchase.
If you have a problem with your lender or its debt collection practices that you can’t fix on your own, help is available. Consider filing a complaint with the Consumer Financial Protection Bureau at https://help.consumerfinance.gov/app/vehicleconsumerloan/ask.
David L. Conrad
President and CEO
The Citizens National Bank