US Auto Woes Continue with GM Announcement

[May 15, 2009.]

 

US automakers Chrysler and GM announced dealership closures this week--how will this potentially impact the availability of auto loans and consumer confidence? No one knows for sure, but as Chrysler and GM go through bankruptcy, they expect to emerge with leaner operations focused on fewer brands. It seems likely that this can help reconfigured US auto manufacturers compete successfully with global auto brands. Regardless of how things turn out for US automakers,  consumers struggling with financial challenges still rely on cars. Here are some tips for getting a car loan with favorable terms.

Auto Loan Terms Improve with Credit Score

As with credit cards and other types of loans, consumers with high credit scores can expect to receive better terms on car loans. Car buyers with less than perfect credit can still qualify for auto loans, but may be charged higher interest rates or additional fees. Ideally, consumers can prepare for buying a car by taking certain steps:

Order credit reports and scores from annualcreditreport.com . This site is sponsored by the three major credit bureaus, and provides one free copy of each bureau's credit report per consumer annually. Credit scores can also be purchased.

• Knowing credit scores: can help in determining potential auto loan rates. Increase credit scores by paying down credit card balances to no more than a third of each credit line.


• Saving for a down payment:The less borrowed for a vehicle purchase, the less risk to the lender. Having a down payment in addition to a trade-is helpful for getting better loan terms.


• Sticking to business:Buying a car is a financial transaction requiring careful thought and planning. Falling in love with a vehicle and taking the first loan offered can cost more in terms of purchase price and auto loan terms.

Bad Credit Auto Loans:? No Problem

Auto loans are considered "secured" loans, which provides the lender the right to repossess the vehicle if payments aren't made. This security interest provides lenders more leeway in negotiating with credit challenged customers. As with any kind of loan, it's important to compare rates and terms before accepting a bad credit auto loan. Ask questions,  and don't be afraid to negotiate with auto dealers and lenders. Falling auto sales are motivating dealers to "deal."

Finally, use common sense. Don't allow your desire for a certain vehicle to outweigh financial considerations including affordability and the cost of financing.

 

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.