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Questions to ask when financing
a car
By Paige
Kroger • Bankrate.com
 The
single most important thing you can do to ensure you get the best
financing deal for your new car is to ask questions. Lots of questions.
Once you understand the basics of car financing,
write out your questions before going to the dealer or the bank.
Here are some key ones that are "must ask" questions.
And to make sure you get the best deal and don't get ripped off,
make sure you get answers and that you fully understand them:
What's the interest
rate I'm really paying?
The APR (annual percentage rate) is the best way to know what
interest you are paying. It is the actual interest rate you pay
annually on the unpaid balance of the loan. The rate you are offered
will to a large extent depend on your credit score, a number that
dealers get from your credit report.
Are there any possible penalties
in my loan?
Does paying the loan off early entail penalties? Are there any other
possible extra charges that could occur during the term of my loan?
Are there "hidden charges," which are effectively penalties.
What the best thing to do
with my old vehicle?
The market, not what you think the vehicle is worth, will set the
value of your transportation, be it a trade-in or a private sale.
Conventional wisdom says don't talk about trade-in price until you
have settled on a price for the new car. The trade in is part of
the dealing process; don't fail to use it to maximum value. The
dealer may offer you a good price, but then get some of his money
back on your new vehicle financing. Make sure you see where your
trade-in money is being applied to the financing, otherwise, some,
most, or even all of it, might never go to making your new car payments
lower.
You'll usually get more selling privately, but
it can be more of a hassle. Do the same research you'll do for your
new car -- plus check local used auto classifieds -- to find out
your best asking price.
How much is that car?
You know not everyone pays sticker price. One way to get the best
buy is to know
how to haggle the price down. Dealers may be willing to bargain
on their profit margin, often between 10 and 20 percent. Usually,
this is the difference between the manufacturer's suggested retail
price (MSRP) and the invoice price.
Research your prospective buy -- new or used
-- and compare it to others. Arriving at a dealership aware of the
price of the car you want to buy is a major advantage. Some sites
that offer pricing as well as other information are Kelley
Blue Book, NADA,
and Edmunds.
What about the deposit?
Before you give anyone a deposit on a vehicle, be sure you know
whether can you get it back if you change your mind -- or is it
gone forever? Get the salesman's answer in writing before you hand
any money over.
Should I buy a "service contract"?
Read the contract from top to bottom then look at everything covered
by warranties and insurance policies. Is there a good chance the
service contract will be needed? Does it cover some unlikely occurrences
that would cost the earth or everyday occurrences that shouldn't
cost too much anyway? Your call.
Also, be sure you know the answers to this six-pack
of questions before you say yes to the financing:
What is the ...
- precise (down to the penny) price I'm paying
for the vehicle?
- total amount (be exact) being financed?
- amount I'm paying for the credit (finance
charge)?
- annual percentage rate (APR) I'm paying?
- exact amount of each payment?
- total number of payments?
Can I bring it back if I
don't like the car, or the deal?
Once a new car is bought, it's bought. You can't take it back (unless
the dealer is a surprisingly nice person). There are some dealers
who do say they'll take it back. It's a huge plus -- but make sure
you get it in writing before you sign and drive away.
What about credit insurance?
Your lender may offer, or even demand, credit insurance. First,
find out exactly what it will cost you. If you have an existing
insurance policy that covers the same thing, make a thorough comparison.
It's not required by federal law, and check your state's requirement
(through the office of your attorney general or insurance commissioner)
if your lender requires it. If you must pay, make sure it is included
in the cost of your credit and see where it is reflected in the
APR you are paying.
Golden rule of auto
financing:
Go prepared. Uncertainty is your enemy,
and salespeople are experienced at recognizing and using it.
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