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Step 1
Before you finance a car, choose a low-risk vehicle. In addition to your credit score, the vehicle you drive will affect your interest rates. Some cars are low-risk because they hold their value well. Others are low-risk because of their age - brand new vehicles especially. Low-risk equals affordable.
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Step 2
Get interested in interest rates. The payoff for financing loans is massive - in the billions, for the more successful companies. Luckily, not every business charges out the yin-yang. Banks and credit unions offer competitive interest rates, as do numerous online lenders. Potential buyers should shop around for the highest possible savings.
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Step 3
Set your loan terms at 36 months or less. The most attractive interest rates are offered to those who finance within that three year timeframe. In addition, a generous down payment can also help improve a vehicle's loan-to-value ratio. When you finance a car, the smaller the gap between loan amount and car value, the better the interest rate will be.
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Step 4
Don't trust the dealer. To entice buyers to finance with their dealerships, car salesmen use underhanded tricks. They might offer a lower monthly payment than a bank, but "forget" to mention that the terms are 6 months longer. Always look over the terms, compare aspects beyond the monthly payment, and use a calculator if the need arises.
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Step 5
Get gap insurance whenever you finance a car. If the vehicle is worth 10,000 dollars, but the owner still owes 14,000 dollars on the loan, then there is an enormous gap. That 4,000 dollars needs to be covered by somebody! Whether in the case of an accident or car theft, auto insurance companies will refund no more than the true value of the vehicle.
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Step 6
Look for negotiable charges and refuse to finance them. Some dealerships will sneak a 300 dollar fee for "window etching" into the paperwork and say that it's required by the lender. Walk away from these false claims; do-it-yourself window etching kits cost less than 30 dollars! You shouldn't have to pay for something you didn't order.
