Auto Loan Financing - 2011
Rosemary K. Heins
University of Minnesota Extension Educator
Stereos and tinted windows aren’t the only options to consider when purchasing a vehicle. You also need to look at your choices for financing a new car unless you are only going to buy what you can pay for in cash.
Consider these strategies the next time a car loan is in your future.
Shop for a loan before you visit a dealership or bid for a car. After reviewing your credit report and correcting any errors, ask your bank and perhaps several other lenders about their loans and the costs. You’ll know where you can get the best possible terms.
Find out what dealers are offering in terms of financing by reading their ads, making phone calls, or checking the internet. Many offer discounted loans or even zero percent financing. In some situations, it may be better to accept the dealer’s rebate and pass up the zero-percent financing in favor of a bank loan that does charge interest.
Think carefully about how much car you can afford and how much loan do you want. Don’t forget the costs of auto insurance, sales taxes, license tabs. Every item you add to the loan rather than paying upfront adds to the total cost of the loan.
And one final point to consider are the costs and risks of a long repayment period. A longer payment period means a lower monthly payment but remember the total cost overall will be much more. An aging vehicle’s resale value may fall below what you owe on the loan if the terms are spread out too long.
Before you put the new vehicle into your garage, evaluate your choices and options for making the best personal finance choice.