You have done your research for that new car you want to buy. You
have narrowed down the choices, checked the gas mileage ratings, checked the
maintenance history, checked the typical resale value, and gotten opinions from
others about the various local car dealerships that offer your choice to
understand the rating they get for post-sale service and support.
But do not ignore an aspect of this whole thing that is probably every bit as
important as the actual make and model of the car that you choose, which is
financing the car or truck with the best deal possible on a car loan or truck
loan. You need to gain some knowledge about financing if you do not understand
long-term financing, because the whole deal with financing is that you have more
options than you think you do, and even options that look identical on the
surface, like cars, are entirely different when you take a peek under the hood.
In other words, getting the best car loan or truck loan, whether a new car or
truck, or a used car or truck, is MUCH more than just the monthly payment amount
that you are quoted.
Of course the car dealerships anticipate this. You are in the spotless
showroom with the free coffee and the shiny new vehicles on the showroom floor
just itching to be driven by you, and your right foot is already twitching with
the thoughts of getting this baby on the road to see what she can do. So the car
dealerships have “guaranteed financing” programs already setup, all you need
to do is sign your name and the car keys will be in your hand.
Do not fall for it, at least not until you have done your homework. In fact,
this is a part of your homework that you can do prior to even setting foot in
the dealership. Do your homework and perhaps even get pre-approved from a
lending source before you go to the dealership. More often than not, if you tell
the car salesman that you have already been pre-approved for financing, you can
often get an even sweeter deal. But by all means, do NOT tell them how MUCH you
are approved for, since then he will feel obligated to get as close to that
amount as possible.
While it may be attractive to get a 6 or 7 year car loan, perhaps even
longer, when you look at the monthly payment figure, this is rarely a good deal
based on the amount of interest you are going to be paying. You need to look at
what you have paid for the vehicle at the end of the loan period. For example,
on that $40,000 new car on car finance plan 1, you might have paid a total of
$55,000 for it, including interest, whereas on car finance plan 2, you only paid
$48,000 for it. That is an extra $7,000 that went flying out of your pocket
needlessly, and I know you can think of better uses for $7,000 than the toilet.
Yes, the interest rate alone can indeed make that much difference.
Bottom line: do your car financing and truck financing homework as carefully
as you did research on what type of car to buy, and you can save a ton of
headaches, as well as keeping much more of your hard-earned money in your
wallet. Jon is a computer engineer who maintains web sites on a variety of
topics based on his knowledge and experience. You can read more about car loans
and car financing at his web site at Great
Car Loan Financing Options