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Compare Auto Loan Options Beyond The Dealership: It’ll Be Worth Your Time And Effort

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When you are looking to purchase a new vehicle, the car dealer is likely to offer what might come across as the best financing plan available.

However, while dealer-financed or dealer-assisted financing may be beneficial, the situation may be much more obfuscated than it originally appears. Because of the relative lack of regulations within the market, there are opportunities for less-than-upright individuals to take advantage of unsuspecting car buyers.

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Sometimes, dealers have partnerships with particular credit unions and banks and are able to offer better loan options than you are likely to find just by researching on your own. Yet, that is not always the case. It is imperative to take responsibility over your own financial situation and understand which options are available to you.

Consumer Reports[1] commented, regardless of government or protection agency oversight, “There’s still much you as a prospective car buyer can do to protect yourself against predatory dealer practices.”

Three Potholes You Can Avoid By Not Financing Through Your Dealership

Drive Home Today! And Risk “Yo-Yo” Financing: While it may be appealing to test drive cars, fall in love, sign documents and drive home, there’s a strong case against this practice. When you sign documents based on “likely approval” rates through the dealership, you face the probability of receiving a call — days later — from the dealership telling you things didn’t go as planned. Your financing was not approved.

You are required to pay more on the down payment. You have to accept a higher interest rate. You must find a co-signer. You need to return the vehicle. Or, any combination of these possibilities.

If you do decide to go with financing at the dealership, make sure to see proof of the loan authorization. You need to ensure that what you are signing is filled out, complete and specifically has the approval of the lender for the loan amount.

The Federal Trade Commission[2] cautioned, “Ask questions about the terms of the contract before you sign. For example, ask whether the terms of the contract are final and have been fully approved before you sign and leave the dealership with the vehicle. If the dealer says they are still working on the approval, be aware that the deal is not yet final.”

The Interest Rate Is The Best Available! But, The Dealership Is Adding Up To 2.5%: It may be unethical, but it isn’t necessarily illegal.[1] Dealerships can tack on additional interest rates beyond what the lender charges.

Regardless of if you sign for financing in-dealership, do your research on new and used car interest rates. Find out what online lenders, banks and credit unions are offering and seek pre-approval to determine what your lowest rate could be.

We’ll Cover Your Old Car’s Loan! By Rolling The Difference Into This New Loan: If you are interested in trading in your old car, but still owe on its loan, dealerships may offer to take care of it for you. Be particularly aware of this offer and make sure that the newly drafted loan does not include the amount you owed on the trade-in.

Make sure to understand what you are signing. If there are items on any document that don’t make sense or any amounts that don’t seem to add up, ask for explanations. It is your responsibility to understand what you are signing. Regardless of whether you completely understand, once you sign, you have engaged in a legally binding, contractual agreement. Take it seriously.

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Not all dealership-financing options are bad, and you may be fortunate enough to avoid these potential roadblocks. But, it is important to know that these practices do occur. You can avoid these snags by taking control over the situation and coming to the table with knowledge about the lending market. By walking into the dealership with a pre-approval and awareness about what car loan rates are being offered at various institutes, you are only empowering yourself.

It may take time. It may be frustrating not to receive immediate gratification. But buying a car should not be taken lightly. Car loans are large debts, which need to be understood as such. You are agreeing to pay a substantial amount over a long period through lender intermediaries. Do not fall victim to buyer’s high and drive away same day. Come prepared, take time to read all documents and have in hand various financing options before you ever put pen to paper.

[1]http://www.consumerreports.org/cro/news/2010/06/how-to-avoid-hidden-traps-in-dealer-financed-auto-loans/index.htm

[2]http://www.consumer.ftc.gov/articles/0056-understanding-vehicle-financing

 

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