Auto Loans: Find Financing Before Buying

[Apr 16, 2009.]

 

The Wall Street Journal reports that among the 21 largest banks receiving TARP funds, lending rates for all types of consumer loans fell by slightly more than 2% during February. Although these figures include auto loans, car buyers need not worry. Resources for auto loans include local banks, online banks, credit unions, and auto industry sponsored financing. Tightening credit highlights the importance of shopping for auto loans before looking for a new or used car.

Fast Loan Approval Not the Only Consideration

Consumers have traditionally put the cart before the horse when it comes to buying cars--they find a car they want before getting a for a loan to pay for it. There are disadvantages to this scenario including:

• Limited time for comparing auto loans: Dealerships may pressure you to accept the first loan they can find for you. Their interest is in selling a car, while the customer's interest is in negotiating the best deal possible on a vehicle and auto loan.


• Auto loan approval provides limits:  Customers who have prior loan approval know what they can afford to spend, and can focus on affordable options instead of falling for a vehicle they'll have trouble financing.


• Negotiating power:Buyers who are pre-approved for auto loan may have more leverage in negotiating; a pre-approved auto loan indicates that the buyer is not "just looking", but intends to buy. Buyers can also reaffirm their price limits by saying "I have loan approval for $25,000. how can you help me?"


• Pressure to accept first loan offered: Dealerships depend on selling cars, and facilitating sales through streamlined in-house financing increases profits. Getting the best deal on auto loans requires comparison shopping and making  informed decisions.  Shop for auto loans from several sources.


• Missed opportunity: Don't forget to shop for auto loans online. Online banks have less overhead and may pass savings on to customers.

Shopping for auto loans before shopping for a new ride can help in finding a loan that's affordable and provides the best financing terms. Getting a great deal on a car is made sweeter by getting the best deal on a car loan.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.