Auto Finance

So, you want to replace your car or buy your first one. Are you willing to do your homework or do you want your wallet to be a conduit for your cash to flow to other people? Let’s assume you want to buy the right car for you, you want to pay as little as possible for financing it, and you’re willing to do some net- phone- and leg-work to make that happen. The first order of business is to find out what your FICO number is. That’s the number that tells your finance company how good/bad a credit risk you are and that is how they will determine the rate of interest to charge you. You can get a credit report for free once a year from each of the major credit bureaus, but it will cost you a few bucks to get your FICO score. Make sure that’s all you’re getting. Be careful not to sign up for a subscription. If you know the range of interest rates your score should qualify you for, you’ll know if someone is trying to make extra money by tacking on a percentage point or two. Be prepared, especially if you’re female, poor, young, or visibly ethnic. Surprise.

The second order of business is to check around on the net and see what the going rates are for your score. Then you can play around with the calculators and figure out what your car payments might be, depending on the car and the amount of a down payment you can make. If you can possibly manage it, the cheapest way to go is to buy a car that’s a year or two old, and to pay cash. The first year is when the biggest depreciation hits are taken. Why not let somebody else take that hit for you? And if you pay cash, you won’t be paying any finance fees.

Read Consumer Reports, Kelley Blue Books, and anything else you can think of to select the make and model of car you want. Research how much the insurance is going to cost, too. When you have an idea of the size loan you will need, ask your bank or credit union if you can get pre-approved for a loan. You will then have a bargaining chip when you shop for the car. If the dealer wants to finance your loan, let them offer you a better rate than the bank. And do read the postings on the boards about what shenanigans might be pulled on you.

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