Buying your first car is an exciting step - but it can also be overwhelming and stressful and is never filled with as much uncertainty as it is the first time. If you take the time to do a little research before visiting the dealerships, your first car-buying experience can be a lot less stressful and a lot more fun! Being a good first-time buyer won't be easy, but if it's worth doing - and it is - it's worth doing well. We've come up with some tips to help with the process.
Establish a realistic budget. This figure is generally based on what you can afford per month. Look at your cost of living - mortgage or rent payments, food, insurance, social activities. Once those are calculated, the remainder could be spent on a car payment, fuel, car insurance and maintenance.
Visit your credit union to get pre-approved for financing. Before you fall in love with a car you may not be able to afford, go to your local credit union. Their lenders can get you pre-approved for financing at a great rate that fits your lifestyle and budget. You'll also know exactly how much you can spend, which will give you added negotiating power at the dealership.
Do your research. Informed shoppers are smart shoppers, so gather some information before you start shopping. Resources like Consumer Reports, Edmunds and Kelley Blue Book offer helpful vehicle reviews and pricing information that can help you determine a fair price for the car you want.
Take a test drive. Nothing is more important in your decision process than how you feel behind the wheel. Take at least half an hour on your test drive, while trying stop-and-go, freeway merging and freeway speeds. If the sales person does not have time then take the time to find another dealership.
Bring a wingman or woman to the dealership. It's always best to work with a partner. They can help you decide what car to buy and what to pay.
Negotiate your price. Price negotiation is probably the most overwhelming part of the car-buying process, but it is important for you to stick to your strategy. If you've done your research, you'll have a good idea whether the dealer's offer is fair. Keep in mind that the dealer's first price is rarely their best price, so don't be afraid to reject the initial offer. If the dealer can't meet your target price, walk away. Buying a car is a big step and the transaction has to be right for you.
Buyer beware. Before signing the final contract, ask the dealer to explain each item. Dealers have been known to include extra charges for items like "fabric protection," "paint sealant" or "rust proofing" that may not be necessary. If there are charges you're not comfortable with, don't be afraid to point them out.
First-time buyers should also be wary of financing deals that sound too good to be true. Offers like "0% dealer financing" may sound good, but as a first-time buyer you may not qualify for these attractive specials.
Most importantly, enjoy the process. We know the tips referenced above can make buying a car seem daunting, but with low financing rates, and hundred of cars and trucks to choose from, your options are amazing (especially in the first-time buyer category). So take your time as you move through the process and you'll be astounded with the outcome.
With a little advanced planning, a solid negotiating strategy and appropriate financing, buying your first car can be a fun and a stress-free experience!
Showing posts with label Auto Loans. Show all posts
Showing posts with label Auto Loans. Show all posts
Thursday, March 5, 2015
Tuesday, January 6, 2015
Bad Credit Auto Financing Tips
Bad credit sometimes stands in the way of getting a car loan, but it doesn't have to. Information is king and whomever is the most informed usually walks away the winner, although in this case driving away is the goal.
Let's face it; its 2014 and the Internet provides the ability to access information from anywhere in the world has changed the way we all do business. This kind of access to information can be to your benefit or your demise! Your credit score is one of the most important forms of information that potential creditors want to access to qualify and rank you as a potential customer. These creditors are not the enemy. In fact they are our friends (at least we should pretend they are). They literally hold the keys to your new auto loan. Bad credit aside, the credit report tells the auto lender how much risk is involved with lending you their money.
Playing The Game
I am going to side bar for a second and talk about "Why you don't NEED the bad credit auto lenders money!" Well actually you do need their money to successfully finance your auto loan but there is a key difference I would like to point out. Simply do not "Act" as if you absolutely need their money, that is you have to play the game just as they do. Desperation is your worse enemy if you have bad credit and are in dire need of a new car. Lenders don't make money from lending you money and having you only pay back what you borrowed. They make money from interest on your car loan, and those interest rates can get pretty outrageous. Upwards of 20% depending on the lender, but can average around 15% for those with low credit scores. My point is that you must not give in to the first loan offer, you must NEGOTIATE! Lenders understand that you have probably been turned down multiple times (in fact they can absolutely tell from simply looking at your credit report) and now that you have been approved you will simply roll over at any loan terms they offer. Do not be afraid to let them know that you are interested but the interest rate is too high, or the total monthly payments are a bit much for you to sign for the loan that day. This tip is more mental but very much so practical and effective.
Know Their Playbook
Your credit score is a snapshot of the past but an indicator of how doing business with you in the future might look like. Auto lenders are only interested in the risks vs. rewards. Now I have purposely not used the terms "car dealer" or "auto dealership" for a reason. I wanted you to begin to separate the idea between lender and dealer. Your local car dealerships do not lend money, nor do they have any to lend you! (I am sure they would if they could) The dealerships are simply a middle man, they hold car inventory and have all the local resources necessary to sell the vehicles and negotiate the terms and conditions of the loan between the lender and yourself. Here are some useful tips for you to consider so that you are not easily taken advantage of while working with the bad credit auto dealers in your area. Check them out:
Shady Tactics - You should never be required to buy an extended service or warranty agreement. Dealers like to pull this little sneaky trick because it puts profit directly into their pockets. This is where my above rants on the differences between dealers and lenders come in to play. Dealers make their money on the differences between what they owe the car manufacture and what they sold it to you for. (They also get bonuses for meeting monthly, quarterly and annual volume goals). This shady tactic is simply about leveraging your desperation and squeezing extra profit from you in a time of need. Luckily the ease and access to quality information comes full circle, because you are here to increase your knowledge and hopefully that will bring you one step closer to a new or used car loan.
Know Your Score - This is as simple as it gets. This is not a step you should ever skip. You should absolutely know your score before you even step into a dealership. Bad credit loans typically come with high interest rates and sometimes require larger down payments. Dealers cannot really adjust or play with that fixed interest rate because that comes directly from the bank. However they routinely lie about how much of a down payment is required to secure your new loan. The lender could request a $2500 down payment but the dealership would tell you that a $5000 down payment is required. Again their intent is to pocket the extra $2500 as profit. They normally can squeeze this extra cash out of you by simply lying about the credit score that came back and scaring you into thinking that $5000 was required by the bank to get the loan done. Like I said "Know Your Score!". Enough said.
Total Price Is KING - If you have bad or damaged credit it is probably for this simple reason: At some point you owed more money than you had to pay out and things got ugly. Well typically this type of history follows behind a shortage of cash or inadequate monthly income sources. In turn you simply begin to manage and think about all financial decisions as a monthly payment. This is not inherently a bad practice however you must remember that your auto loan is going to come with a pretty hefty annual interest rate. This can blind you while you considering your needs for a new car. Monthly payment... Monthly payment..that's your typical mantra as you approach the dealership looking for a car. However this is the mantra of the salesperson as well. That's a problem and here is why: You should be interested in negotiating total price because that is the only way you are going to truly save some money. The dealer is interested in negotiating monthly payment because that keeps your attention away from the fact that they are not discounting the price of the car. It also keeps your attention away from the fact that your monthly payment will mainly be made up of your interest due and only a small part of your principal balance. So if you are even mildly interested in saving some money, which I know you are, then focus on the only area you can actually do so: Total price of the car, not the monthly payment.
Let's face it; its 2014 and the Internet provides the ability to access information from anywhere in the world has changed the way we all do business. This kind of access to information can be to your benefit or your demise! Your credit score is one of the most important forms of information that potential creditors want to access to qualify and rank you as a potential customer. These creditors are not the enemy. In fact they are our friends (at least we should pretend they are). They literally hold the keys to your new auto loan. Bad credit aside, the credit report tells the auto lender how much risk is involved with lending you their money.
Playing The Game
I am going to side bar for a second and talk about "Why you don't NEED the bad credit auto lenders money!" Well actually you do need their money to successfully finance your auto loan but there is a key difference I would like to point out. Simply do not "Act" as if you absolutely need their money, that is you have to play the game just as they do. Desperation is your worse enemy if you have bad credit and are in dire need of a new car. Lenders don't make money from lending you money and having you only pay back what you borrowed. They make money from interest on your car loan, and those interest rates can get pretty outrageous. Upwards of 20% depending on the lender, but can average around 15% for those with low credit scores. My point is that you must not give in to the first loan offer, you must NEGOTIATE! Lenders understand that you have probably been turned down multiple times (in fact they can absolutely tell from simply looking at your credit report) and now that you have been approved you will simply roll over at any loan terms they offer. Do not be afraid to let them know that you are interested but the interest rate is too high, or the total monthly payments are a bit much for you to sign for the loan that day. This tip is more mental but very much so practical and effective.
Know Their Playbook
Your credit score is a snapshot of the past but an indicator of how doing business with you in the future might look like. Auto lenders are only interested in the risks vs. rewards. Now I have purposely not used the terms "car dealer" or "auto dealership" for a reason. I wanted you to begin to separate the idea between lender and dealer. Your local car dealerships do not lend money, nor do they have any to lend you! (I am sure they would if they could) The dealerships are simply a middle man, they hold car inventory and have all the local resources necessary to sell the vehicles and negotiate the terms and conditions of the loan between the lender and yourself. Here are some useful tips for you to consider so that you are not easily taken advantage of while working with the bad credit auto dealers in your area. Check them out:
Shady Tactics - You should never be required to buy an extended service or warranty agreement. Dealers like to pull this little sneaky trick because it puts profit directly into their pockets. This is where my above rants on the differences between dealers and lenders come in to play. Dealers make their money on the differences between what they owe the car manufacture and what they sold it to you for. (They also get bonuses for meeting monthly, quarterly and annual volume goals). This shady tactic is simply about leveraging your desperation and squeezing extra profit from you in a time of need. Luckily the ease and access to quality information comes full circle, because you are here to increase your knowledge and hopefully that will bring you one step closer to a new or used car loan.
Know Your Score - This is as simple as it gets. This is not a step you should ever skip. You should absolutely know your score before you even step into a dealership. Bad credit loans typically come with high interest rates and sometimes require larger down payments. Dealers cannot really adjust or play with that fixed interest rate because that comes directly from the bank. However they routinely lie about how much of a down payment is required to secure your new loan. The lender could request a $2500 down payment but the dealership would tell you that a $5000 down payment is required. Again their intent is to pocket the extra $2500 as profit. They normally can squeeze this extra cash out of you by simply lying about the credit score that came back and scaring you into thinking that $5000 was required by the bank to get the loan done. Like I said "Know Your Score!". Enough said.
Total Price Is KING - If you have bad or damaged credit it is probably for this simple reason: At some point you owed more money than you had to pay out and things got ugly. Well typically this type of history follows behind a shortage of cash or inadequate monthly income sources. In turn you simply begin to manage and think about all financial decisions as a monthly payment. This is not inherently a bad practice however you must remember that your auto loan is going to come with a pretty hefty annual interest rate. This can blind you while you considering your needs for a new car. Monthly payment... Monthly payment..that's your typical mantra as you approach the dealership looking for a car. However this is the mantra of the salesperson as well. That's a problem and here is why: You should be interested in negotiating total price because that is the only way you are going to truly save some money. The dealer is interested in negotiating monthly payment because that keeps your attention away from the fact that they are not discounting the price of the car. It also keeps your attention away from the fact that your monthly payment will mainly be made up of your interest due and only a small part of your principal balance. So if you are even mildly interested in saving some money, which I know you are, then focus on the only area you can actually do so: Total price of the car, not the monthly payment.
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