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Car Loan - Tips Can Help Drive Smart Loan Deals
By: Alan Luong
Many new car buyers will appreciate the latest automotive trends expected to
take shape in 2006 and beyond. A greater variety of downsized, fuel-efficient
SUVs will be available. New vehicle safety features like tire pressure monitors
will reach the market. And sales promotions like last summer’s employee discount
campaign are expected to set the stage for year-round, no-haggle vehicle
pricing.
But a less-publicized automotive trend – rising interest rates – will make
0-percent car loans a rare breed in 2006. Increasingly, consumers will need to
comparison shop for their car loans before they go to buy, just as they do for
the vehicles themselves.
According to http://Bankrate.com, interest rates on new car loans rose steadily
throughout 2005 and the pattern is expected to continue into 2006. The
difference of just two percentage points on your APR can either save or cost you
more than $1,400 over the life of a typical loan.
"Many consumers do not realize that they have other options for financing their
car, outside of the dealership," said Brian Reed, vice president of Capital One
Auto Finance. "There are some great options for consumers to finance their car
on a direct basis, versus relying on the dealer to provide that service for
you."
Because education is the key to getting the best deal when financing a car,
Capital One Auto Finance offers prospective car buyers the following helpful
tips:
Set a realistic budget. Choose a vehicle that won’t overextend you financially.
A general rule of thumb is that no more than 15 percent to 20 percent of your
total monthly budget should go toward all your car-related expenses.
Verify your credit record. Order a copy of your credit report to ensure it’s
accurate and in good shape. Correct any errors before applying for a loan.
Comparison shop for loans. Check out credit unions, banks and online lenders to
see what rates are available in the market, so that you know a competitive rate
when you see one. Visit Web sites such as http://www.bankrate.com and http://www.capitaloneautofinance.com.
Arrive with financing in your pocket. Having approved, no-obligation financing
in hand gives you a competitive advantage when you go to buy, giving you the
power of a cash buyer. If the dealer offers a better loan rate, you can take it
with no penalty.
Approach your purchase as three transactions. It’s best to treat each part of
the purchase separately: 1) financing; 2) trade-in; and 3) vehicle purchase.
This will simplify the process and maximize your negotiating opportunities.
Match length of loan to expected length of ownership. Select your loan term
based on how long you plan to own the vehicle. Buyers who take out longer-term
loans can find themselves “upside down” on their loan (owing more money on the
car than it’s worth in trade).
Review your financing terms carefully. Make sure you know your interest rate,
monthly payment, amount you are financing, the length of your loan and your
trade-in value.
“If car buyers would spend just a fraction of the time researching their auto
loan as they do the latest features on their new car, they’d be surprised at how
much money they could save,” said Reed of Capital One.
About the Author:
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