advertisement
"If they're not flexible enough to lend to people," said Jesse Toprak, the director of pricing and market analysis at Edmunds.com, "they're not fulfilling their function, which is to help the dealerships sell cars."
As delinquencies have increased, lenders -- captive and otherwise -- have focused more attention on snaring good-credit customers with low rates. They're still making loans to people with less-than-perfect credit, Toprak said, but their rates tend to be higher than in the past, and they may require more money down.
What lenders offer, though, can vary from moment to moment, with the captive lenders being the most erratic, Toprak said.
"One month, as long as you qualify for any financing, you'll get the 0% rate," Toprak said. "The next month, only (the best) credit gets the 0% rate. Everybody else has to pay the regular rate."
So how can you make sure you get the best possible deal? Here's your game plan:
- Polish your credit scores. The better your scores, the better the deals. The fastest way to boost your FICOs is to pay down credit card balances, pay bills on time and dispute any serious errors to get them off your credit reports. You're entitled to one free copy of each of your three credit reports from Annualcreditreport.com; scores derived from those reports aren't free, but you can purchase FICO scores for all three bureaus from MyFico.com.
- Do your homework. Research cars and current incentives, such as low-rate financing, cash back or leasing deals, using sites such as MSN Autos, Edmunds.com, Cars.com and Consumer Reports. (Consumer Reports offers unlimited new-car reports, which include detailed pricing information and reviews, for $39.) And here's my take: Although manufacturers are offering some eye-popping deals on leases right now, keep in mind that buying and keeping your car for 10 years or more makes the most financial sense. Only people who are saving enough for retirement and for their kids' college educations, who have fat emergency funds and who still have money to burn should consider leasing as an alternative to buying a new car every three or four years.
More from MSN
- Figure out what you can really afford. No car is a bargain if it upends your financial life. My take: Don't finance a car for longer than four years, try to put 20% down to make sure you always have some equity in the vehicle, and be wary of payments that eat up more than 10% of your gross income.
- Get approved elsewhere for the loan. Credit unions, banks and online sites such as E-Loan typically offer the best rates. (You can compare rates nationwide here.) Applying for a loan doesn't mean you have to take the money, Toprak said, but it does lock in a rate that you can then take to a dealership. "You're getting an idea of your market value," he said.
Video on MSN Money
More delinquent auto loans?A new report from Lehman Bros. predicts there will be an increase in auto loan delinquencies, and CNBCs Phil LeBeau has the details.
- Ask the dealership to beat the rate. You'll want to first negotiate all other aspects of the deal, including the price of the car and the value of your trade-in. Only then do you bring out your lender's rate and ask the dealership to do better. The dealership often has access to "a slightly better wholesale rate" that could knock a quarter of a percentage point off your rate. If so, you can take the dealer financing; if not, go to the lender that has already approved you and get a cashier's check to buy the car.
Liz Pulliam Weston's new book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published March 6, 2008
< previous | 1 | 2 |
Rate this Article
High