There are
many things to consider when you are discussing the financing of a
vehicle. If anything is vague or confusing to you, you need to give it
some time to think it out. If you are offered a deal that is too good to
be true, have it put in writing and signed by the manager.
Here are some questions that you
must ask. Write them down and make sure that you ask them.
What interest rate am I really paying?
The APR is the best way to understand the interest you are
paying. This is the actual interest rate you are paying annually on the
unpaid balance of the loan. The rate you are offered strongly depends on
your credit score, the number that dealers get from your credit report
that analyzes the risk of lending to you.
Are there any other possible charges
that will occur during the term of my loan? Are there any
penalties?
What is the precise price I am
paying for the vehicle?
What is the total amount that will
be financed?
What is the dollar amount of the
finance charges I am paying for the credit?
How much is each payment
exactly?
How many payments will there
be?
Is this deal contingent on the
approval of the financing from a third party?
Often, dealers will send
you off in your car and then call a few days later and say that you were
turned down at the interest rate they quoted, but another lender will lend
to you at a higher rate. Don't fall for this, make sure that you know who
the lender is and that the deal is done before you leave the lot. If there
is any questions, leave the car and tell the dealer you will be back when
it is all settled.
Is credit insurance
necessary?
Your lender may offer or demand credit insurance. You should
find out exactly what this will cost you. If you have an existing
insurance policy that gives this coverage, then make a thorough
comparison. It's not required by the federal law, and if the lender
requires it, check your state's requirements. It's very rare that the
state will require it. But if you must have it, make sure that it is
included in the cost of your credit. You should make sure that it is not
subject to interest charges.
