Credit programs were developed in order to help people obtain large purchases. The average person would never be able to afford a home or vehicle, in cash. Credit allowed them to make pre approved amounts of payments toward these purchases. In return, the company or creditor issuing the funds up front would charge a monthly interest fee, making the entire transaction worth it to them. These interest rates are not always the same, and can vary, depending on a lot of different factors. How can a new car buyer ensure that they are receiving a good deal and that they are not being taken advantage of?
Request a pre approval, prior to vehicle shopping.
The smart way to car shop is to obtain a vehicle pre approval, prior to even stepping foot into a car dealership. Many people come across their dream car, and then get so emotionally involved in purchasing it that they never pay attention to the terms of the loan. They may also never check to ensure that the vehicle is worth the asking price. A pre approval gives you an amount you can obtain a loan for, so you know what budget to look in.
Request loan rates for used versus new vehicles.
Lenders may give a borrower better rates, based on the year and mileage of the vehicle. Newer cars are less likely to break down, meaning they are more likely to receive their monthly payments. Auto financing companies may also get longer term loans on newer vehicles, spreading the payments out over more years. This can drastically reduce the monthly payment of the vehicle.
The ability to spread the loan payments out can allow some buyers to make upgrades that they may have not made otherwise. Gen Y consumers, who have accounted for 27.7% of new vehicle sales thus far in 2015 are willing to spend an average of $3,703 on technology for their next vehicle. One of the most common technology upgrades is night vision. It is the second most popular new car technology, preferred by 33%.
Request a car fax from your auto dealer.
Although most auto financing sources will not require a car fax or any previous ownership records, it is beneficial for evaluating the true value of the vehicle. Overpaying for a vehicle can prevent resale in the future, and can leave a car owner underwater with their car payments. Many car dealers will offer either a Carfax or a certification on their used vehicles.
The car fax notifies the next buyer of any known problems with the vehicle from its previous owners. The certification process is a guarantee warranty through the car dealerships, meaning that they will pay for any needed repairs or damages during a set period of time after purchasing the vehicle. Car dealers, backed by manufacturers, offer certified used car programs for newer used cars (usually up to three years old).
Research the blue book value of your vehicle.
A blue book value is an evaluation of the estimated value of your intended vehicle. It offers price point recommendations, based on recent sales. It breaks them down based on the condition and the mileage of the vehicle. Comparing the price of the vehicle a person wants to purchase with the blue book value is a great way to tell if it is a good deal or not. However, it is important to mention that when purchasing from a dealership, a person will often pay a little more than the blue book value. Most auto financing companies are also aware of this.
Many consumers get excited at their ability to purchase a vehicle on credit. However, this loan will have to eventually be paid back, in one way or another. It is important to make an informed decision when buying a used car. A borrower can actually end up losing money if their vehicle is not worth the amount of auto financing they have. They will never be able to sell it, without providing additional funds. Proper research and evaluation of the vehicle?s value can provide valuable information in the car buying decision.