Not too many of us can walk into a used-car lot and pay cash—unless you’re buying, perhaps, an Oldsmobile Achieva. So you will likely need to finance your car, whether it comes from a dealer or a private seller. Don’t forget to check our DealFinder to help you find the lowest prices.
We offer some financing tips and cautions below. Used-car prices have been steadily rising in the last year (trucks are up 11 percent!). So you might get a bit more for your trade than you thought.
But, Caution #1, get your credit report first, before you go shopping. If your credit score is less than 700, you’ll have a tough time getting a loan. Try DriveTime if that’s your situation, or if you are buying from a private party. You’ll have a problem getting a loan for cars more than 4-5 years old.
Caution #2: Check out auto loan rates online. A good place to find these rates is Bankrate.com. Your other choices are local banks, credit unions and private financing, though the online rates often beat these.
Here’s what bankrate.com listed today for its Auto Overnight Averages:
|48-month used car||6.39%||6.39%|
|48-month new car||6.24%||6.26%|
|36-month used car||6.51%||6.52%|
|36-month new car||6.17%||6.19%|
There are links on the site to graph rate trends and a zip-code link so you can view rates in your area.
Caution #3 (with dealers): If you are buying from a dealer, they may have special financing offers (though this isn’t likely for used cars). Don’t make a down payment in cash; use a credit card. Check out an extended warranty: This is important when buying a used car. If you are planning to finance through a dealer, never (as we told you before) tell the salesperson what you can afford as a monthly payment. This gives them room to add in other costs.
If you’re “upside down” (you owe more on your present car than it’s worth), don’t roll that “negative equity” forward. You’ll just compound your financing problems. Sell your car, pay off the difference on your present loan and/or buy a cheaper car. Use an affordability calculator to get your finances in order.
Keep the various elements of the car deal separate—pricing, your trade, negotiation and financing—and you’ll be a happier buyer.
Have you got a car financing story you can share with us?