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The Truth About Auto Loans |  |
Most people head out to the lot or start ripping through the newspaper as soon as they hear that telltale clunk, hum, tick, or thud. This is natural and normal, because nobody wants to deal with the inconvenience and uncertainty of what the mechanical bills will amount to over the next year with their old car, nor is it pleasant to contemplate how many times you might be stranded, and where, before the problems are all identified. Having an older car can be stressful, and looking at those new, shiny, beautiful, slick vehicles with big warrantees and low gas mileage can be extremely tempting. It is important however, especially with a purchase such as this, to collect all of your impulses and really think about where your auto loan is coming from.
Whether your credit and income are excellent or you are just barely hanging on in both regards, there is a car loan out there which will suit your needs without allowing you to be preyed on by high interest toting lenders who understand the pull and desire that new cars can have on people. If you really feel that the time is drawing near for a new or slightly used car, you will want to begin the pre-approval process before you even think about what color car you want. Being armed with an honest interest rate, even if it’s a high one, and some guidelines for your purchase based on price and mileage is a great idea.
Remember, also, that vehicle depreciation happens much more quickly than nearly any other asset that you will ever purchase, depending on how much you use your car and how disciplined you are at caring for it. Even with the most babied and protected vehicles, the auto loan will most likely last until the car is well below its bluebook value. In order to avoid this, you might consider offering a large down payment when you are ready to buy.
If you can place a large amount of cash down toward the purchase of your vehicle, you will not only receive a better interest rate due to the fact that you have shown the initiative to invest earnestly in this purchase, but also because the bank is not being asked to risk as much investment. If you can hold out that long, try to save away a few bucks a week for a few months, or it might even be a good idea to pull some equity out of a home or property, as these interest rates and loan terms are much less stressful and demanding than the average auto loan can be.
If at all possible, try not to agree to dealer financing or negotiation, as most of the lenders involved are bordering predatory and may not give you the credit that you deserve, not matter how iffy your standing with the bureaus. Also, most used car at these financing dealerships are marked up astronomically, some of them more than 80% over their worth. A good rule of thumb is to ask a bank or a legitimate loan officer what amount they might loan for a car of this style, year, mileage, and the like, comparing this figure to the sticker price on the lot. Most of the time, the difference will horrify you.
Finding an honest lender who is willing to work with you on a livable auto loan might not be a walk in the park, but once you have found that lender, you will be very glad that you stuck to your guns and protected yourself against impulse buying and predatory lending.