Rather than achieving “good” agreement with the seller is obliged to save money on the purchase of car. A bug in your car loan can cost money and erase the savings negotiated in the purchase price.
“Big mistakes made in the finance office,” says Phil Reed, senior editor of auto Source consumer advice, the website of the auto research. “Making the right choices can save thousands over the life of the loan.”
Here are five mistakes Reed car loan can cost you money:
1. The negotiation of monthly payment instead of the purchase price.
Reed warns that buying a car based on the amount of monthly payment is a trap. Although you should know what you can pay each month, do not provide that number with the seller. If you do, you will lose your ability to negotiate a lower purchase price. “Do not let it become a monthly payment buyer,” he says.
Once offered, a monthly car loan tells the seller how much space is available to cover other expenses, such as a higher interest rate and accessories. Reed said that negotiating the price of each cost category separately. “Minimize the individual parts of the negotiation – prices, trade and financing of cars,” he says.
2. Let the dealer set the value of its claim.
Reed explained that the value of their claims determined your interest rate auto financing. Your credit score (300-850) is the value of its claim as a number and is based on your credit report with the three credit reporting agencies – Equifax, Experian and TransUnion. A borrower with a high credit score qualifies for a car loan rate better than one with a low score. Shaving just one percentage point of interest for a car loan $ 15. 000 over 60 months could save hundreds of dollars in interest paid over the life of the loan.
Reed said to know your credit score before setting foot on the dealer’s lot. “Most people think their credit score is worse than it is,” he says. “When people do not know your credit score, the dealer can say almost anything.”
Reed recommends that consumers check their own credit pre-approved by obtaining automotive financing. They must go to a bank or credit union and apply for a car loan before visiting the dealership. Even if they intend to take advantage of an interest rate with large discounts offered by the lending agency the automaker, consumers can find the number of vehicles that can be purchased and the rate of interest that qualify for a loan preapproved car. “It’s another way to check your credit,” says Reed.
Erin Downs, a spokesman for the San Francisco-based Wells Fargo & Co., says: “We believe that your credit score, payment history and amount of debt you have.”
3. Make the wrong choice between cash and repayment of loans at low interest rate.
If you want to benefit from a manufacturer of a cash refund or a car loan, low interest, do your homework before deciding. Reed warns that the method varies offset offer more savings to offer.
Bankrate has a calculator which simplifies the comparison. funding from manufacturers of low-interest car is not available for all, which help you know your credit score before speaking with a manager of finance. “Credit must be very good to get low-interest financing,” says Reed.
4. Rolling negative equity interest.
“Upside down” is the term used to describe owing more on your car than it’s worth. The difference is “negative equity.” When a dealer tells a customer that he can reverse double negative equity in the financing of cars of the following offer, meaning he will add to the purchase price of the new car.
You will pay interest on the negative equity for the term of the new loan. On the other hand, if you were upside down in the last trade, most likely it will be much more than face down next time. “It’s a horrible practice and should be avoided,” says Reed. “They just made the problem worse. It is because people are buying more cars than they can afford. Live within your means!”
5. Financing expenses allowances that can be purchased separately.
According to “2009 F & I Statistics “published by Torrance, California-based F and I Management and Technology magazine, nearly 29 percent of the gross average return on new-and used-car sales departments were generated in the F & I, or finance and insurance office through aftermarket accessories.
“Just say no” is good advice. “They are really there to get extra benefits to the dealership for interest rates increasing, and sales of extended warranties and accessories such as fabric protection and paint sealant,” says Reed.
Even if you want an extended warranty or credit life insurance, these items are available at a lower cost sources outside the dealership. Folding them in your car loan and paying interest on them for the life of the loan can add hundreds of dollars to the amount you pay. She also asked each position do not understand.
“Dealers can post other positions in the contract and give them official-sounding names,” says Reed. “These rates are another attempt to capitalize on the back end of the offer if the buyer guard is down.”