How to learn about auto finance and not crash on route?

Learning is a word that has different connotations depending on who you are speaking to and what you are speaking about. Some find learning a pleasure and can’t find enough books, courses and websites to read and enjoy. Others, find learning the most boring and unappetizing activity, only to be engaged when completely necessary and no other alternative is possible. Learning about auto finance often falls into the category of boring as hell subjects that people run away from as soon as it is mentioned. Granted, learning about car finance is hardly a fascinated subject. However, having said that there are few subjects that can save you so much money with so little work.

In fact learning the basics of auto finance will only take you minutes as opposed to hours. Reading and analyzing auto finance offers and  contracts will take longer, but that is the case whether you take the time to actually understand it or not.

We are not saying you should become an Economist either. That would take years and you would still need training to understand the particulars of current auto finance deals.

So what do you need to understand the basics of auto finance? As we mentioned, not much. You will need to read a few articles and get a feel of the market forces that mold the industry. Then it is just a matter of shopping around and getting a feel of what is on sale. Remember you want to learn how to get a good deal not write a thesis on the subject. Just like you don’t need overly technical research to learn how to buy good beans at a good price you don’t need to be a rocket scientist to get a good deal onyour car insurance.

The main market forces that shape the auto finance industry are:

1) Offer and demand. The appetite for loans can shape the profit margin of auto finance companies substantially

2) The interest rate. The government or a Government instituted authority sets the interest rate for banks and lending companies in the country. They then set their own rate based on the national rate. The government will change this interest rate in an attempt to control the economy.

3) Competition. In a healthy marketplace with good competition, prices will be defined by the strength of a company and it’s marketing policies.

These forces help us to shape our auto finance shopping techniques. Here are three tips you should always keep in mind.

1) Do not, NEVER, shop out your budget. Set yourself a reasonable limit for your monthly and overall payments and stick to it.

2) Shop around for the best interest rates and make yourself as good as a customer as you can. If your credit rating is good Banks will be encouraged to reduce their interest rates and attract your custom.

3) Beware of the collateral you use on your car loan. Whatever you place as collateral, your car, your house or your wife could be lost if you default on your payments.

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!