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More good advice on auto loans

[Sep 19, 2011.]


A couple of weeks ago, this blog passed on some helpful advice to consumers who are planning to buy a car (see 4 rules for negotiating the best deal on auto loans). Yesterday, three publications provided some other hints that are worth passing on.

Auto loans essential part of the purchasing mix

Forbes on MSNBC urged car buyers not to be too dazzled by the sticker price. Obviously, you want to get a great deal on that, but there are other, equally important considerations, such as how a particular vehicle will suit your daily needs. And, just as key, is the overall cost of ownership: how much you're going to pay in auto loan payments, gas, insurance, servicing, repairs and so forth during the entire period you keep the vehicle.

Also yesterday, phillyBurbs.com and IndyStar.com both published a syndicated AP article that focused more on auto loans, claiming that these were "buyers' biggest blind spot." That probably doesn't apply to regular visitors to Rebuild.org, but it certainly sounds as if it's all too true for all too many, because the piece claims that about 80 percent of all auto financing is organized by car dealers. And it went on:

The problem is that consumers often get financing at the dealership without exploring their options. Since buyers don't know the interest rates they'll be offered until they're far along in the process of making a purchase, they can end up feeling pressured to accept terms or services they don't want.

Get competitive quotes for auto loans

Candice Choi, the writer of the AP article, recommended--as this blog frequently does--that consumers should always obtain quotes from a variety of sources (online and your bank or credit union) before setting foot on a dealer's lot. It may or may not be that the salesperson is able to beat the quotes you have, but at least you should find yourself in a strong negotiating position.

However, there are three important rules to remember:

  1. Don't reveal the rates you've been quoted to the salesperson; make him or her bid down until you're happy.

  2. Don't say at any point in the negotiations what your monthly payment budget is; you could be inviting some creative financial juggling that results in a worse overall deal.

  3. Make sure the sales agreement is "final" rather than "conditional." Otherwise, the dealer could call you up weeks later and try to force on you a different finance deal at a higher rate. This surprisingly common scam is called "yo-yoing."

If you want to follow Choi's excellent advice and get competitive quotes for auto loans before visiting your dealer, you can find them on this site.


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.

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