Auto finance basics, back to the drawing board.
Recent surveys have shown that most Americans, and this probably extends to other developed countries don’t understand the basics of credit and personal finance matters. A recent Truecredit.com survey showed that over 80% of borrowers don’t know the current credit card rate while 90% don’t know what is actually included in their credit report.
This survey highlights the need to explain the basics of auto financing in order to be prepared to make sound choices when choosing a car and an auto finance option.
Here are the basics of auto finance from start to end:
1) Get started! By getting started we don’t mean get buying, that will happen later, don’t worry. Before you even leave your house you must do your homework and decide what vehicle you need and how much you can afford. A wise adage says you should never go shopping when you are hungry you will spend more than you need. Something similar could be said of buying a car without preparation, not a good idea. There are many choices you must make. What kind of car, diesel or petrol, maybe a green car could save you money both in the gas tank and on the interest rate. You should also decide what your budget is and stick with it. Doing this before you leave home will protect you from overspending.
2) Shop until you drop! Now you have your basics facts and guidelines you are fit to go shopping. Do not even think of making a choice until you have seen enough options to give you a feel of the market. You can do this in two main ways, you can go to car dealers and physically see all the cars you have time check or you can go online and see hundreds of cars and get just as many quotes in the comfort of your home. Once you have chosen the type and model you like you can always go to the nearest car dealer and test drive it. The key word here is COMPARE, COMPARE and COMPARE a little more.
3) B&B, Bargain and buy. Once you know what you want it is time to get the best price you can for it. This will take time and energy, but remember car dealers have significant profit margins they can play with, use this knowledge. If you followed step 2 you also know the variety in prices from even identical models. Use this information and demand the best price there is to have.
4) Pre arrange finance. This is actually step 2b. You are well advised to have finance arranged with a good finance company or bank before you talk finance with your car dealer. In the unlikely case that your car dealer can give you a better price, all the better, just make sure you sign an agreement that sets the finance in stone and not conditional to a third party approving the loan.
You have the basics, use them and happy auto shopping!