ANSWERS: 2
  • First, determine from your budget how much you can comfortably afford for a car payment each month. This will help determine what your price range is before you shop for a car and financing. Naturally, you should try your bank and credit union. When it comes to used cars, they only finance a portion of what it's Kelley "Low" Blue Book value is. If the price of the car you want is more than that, you will either have to come up with difference out-of-pocket or try to negotiate for a lower price. You should also visit websites such as LendingTree.com and E-Loan.com, to name two. These sites offer very good rates, and a lot of buyers are getting qualified. The upshot of these lenders is that they only finance cars no older than three years old and under certain mileage limits. That makes it difficult if you're on a really tight budget. You may get a loan, but not for any kind of car you can afford. If all you can afford is a car five years or older, try thrift and loans. Financing through the dealer should be your rock bottom last resort. If you must finance a car, exhaust all resources to secure financing before you walk onto the dealer's lot. Remember this: If the salesman isn't making much commission off the the negotiated price of the car, then he'll soak you for what you're worth in financing! Educate yourself: log onto www.beat-the.com/secret.html for all you need to know.
  • Just wanted to add to what has already been said. Depending on your local laws, some dealerships, finance companies, etc., penalize a used car buyer by tacking on an additional interest rate point (usually a full point, this can vary) for each year of the vehicle's age to the base interest rate you qualify for. Example: You buy a 2000 model and the base interest rate is 5%. Add the penalty and it becomes 9%. Generally, on used cars, there are no dealership/manufacturer incentives offered either. Do the math. You might be surprised and find that a new car is less expensive. Also, when buying a used car, there is sometimes less flexability on the time of the loan. Loans may only be available for 24 months for an older car and that probably doesn't fit most budgets. You will find that this is relaxed a bit when the used vehicle tends to retain it's value, is exotic, or is classified as "luxury". Loans can be anywhere from 1-10 years. That is not a typo, I have actually seen this on a used Mercedes Benz. The guy financed it for 10 years (the car was $60k). 10 years! I would have hated to see the total amount of interest on that loan. Something I have recently noticed in the paper (I live in the Washington DC area) is that leases are being offered on used cars. I do not know anything about how this works, but leased cars tend to have smaller monthly payments. They also require larger downpayments in most cases. Financing options do not really differ for used or new cars. You can secure a loan for either through a bank, credit union, or the dealership. Shop, shop, shop! The rates and terms vary and while a 1-2% difference in interest rate doesn't seem like much, it is a lot when you do the math. I financed a car once and do not intend to ever do so again. If you can, make extra payments (as long as your loan contract does not penalize you for doing do) and go for an early payoff.

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