Used Car Finance: Tips
Used Car Finance
Firstly you should arrange your used car finance before you go to negotiate the price of the car you are buying with the dealership or the private owner. Actually, you are better off doing this before you even visit them. Dealers of used cars may only make a small margin on selling the car – which is the front end profit – if they are sure they will make a lot of money on the car's financing (the back-end profit). So be careful, as you could give back on the financing what you save on the purchase. Private owners can't provide financing so you need to get it arranged by yourself.
If used car buyers spent as much time on financing as they do on preparing to buy their car then they could come away with a good deal on both counts. One thing you should do is to investigate all of the car financing options that you have and find out what your credit position is before you start the buying process. Different sources will provide different rates for financing. So you can save hundreds in interest charges that you don't need to pay by getting the right one. A lot of confusion would be eliminated by establishing finance in advance.
Most importantly, when you negotiate your price your bargaining position is heavily strengthened. To understand this put yourself in the shoes of a used car seller or dealer. He has two buyers in front of him for the same car, and one has the financing arranged and one will apply for finance sometime in the future. Which one will you spend more time negotiating with? Which offer would you put more emphasis on responding to?
When you check your credit, understand that it is your responsibility to make sure that your credit report doesn't have mistakes on it or has omissions which would make your finance application be turned down. The financial institutions tend to determine the interest rates they will charge by looking at your credit record and also how “in line” is the price of the used car compared to its book value.
The internet has made comparing finance offers very easy. You can actually use comparison services to fill in one simple application form and get back up to about 5 offers from different financial institutions who will be competing for your business. You should used this to know what you can get and compare it against what the dealer offers you.
You can also look for financing at your local bank, but the rate may be less competitive, or by taking out equity from your home, which is dangerous as it is secured on your home, but you can deduct tax on the loan interest.