Tips for Financing a Car the Smart Way

Thursday, December 15, 2011, 2:00 AM | Leave Comment

Automotive finance can be a dizzying prospect. There are so many different companies out there that offer auto financing, that you can never really tell which ones are above board, and which ones aren’t. The problem becomes even more pronounced when you factor in poor credit auto loans and car title loans. With such a varied landscape, what’s the best way to proceed?

To begin with, it helps to understand the different types of automotive financing available. There’s new car financing available through banks, used car financing through those same banks, and then there are dedicated finance companies that deal only with auto finance. There are also buy-here, pay-here dealerships that offer their own financing to customers, though these financing options usually work quite a bit differently than the types of loans you may be familiar with.

Before applying for any auto loan, it’s a good idea to take a good look at your credit score. Regardless of the loan you want to apply for, a good, high credit score will help you to be offered the best possible terms for your loan. Your credit score is tied to the number of on-time payments to places such as phone companies, credit card companies, and student loans you have, so make sure that you’re making diligent, on-time payments to these companies, even if you can only make minimum payments, for at least a year.

When you apply for financing, work from the top down. What this means is that you shouldn’t sell yourself, or your credit, short. Apply for financing at a typical, branded dealership before you try to look at a car at a buy-here, pay-here lot. You might be surprised at just how favorable the terms may be. Of course, it may be necessary to have a co-signer, but you’ll get a better deal all the way around.

There are businesses out there that you have to watch out for when applying for auto credit. These companies usually charge insanely high interest rates, and have some of the worst repayment terms in the industry. Buy-here, Pay-here lots are particularly bad, as they charge the highest interest rate allowable by law. One clue as to whether a car finance company is reputable is to look at the fine print and ask just one question, “Is there a fee or penalty for early repayment?” If the answer is yes, then you can do better by shopping around before you sign a credit agreement.

Bio: Charles is a writer who enjoys blogging about cars. Currently he blogs for a company that pays money for cars. A company that can help you sell your vehicle.

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