If you decide to finance your new auto, be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get. Contact lenders directly. Compare the financing they offer you with the financing the dealer offers you.
Because offers vary, shop around for the best deal, comparing the annual percentage rate (APR) and the length of the loan. When negotiating to finance a new auto, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the auto you negotiate, the APR, and the length of the loan.
Sometimes, dealers offer very low financing rates for specific new autos or models, but may not be willing to negotiate on the price of these new autos. To qualify for the special rates, you may be required to make a large down payment.
With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a new auto that is lower in price or to buy an auto that requires a smaller down payment.
Before you sign a contract to purchase or finance the new auto, consider the terms of the financing and evaluate whether it is affordable. Before you drive off the lot, be sure to have a copy of the contract that both you and the dealer have signed and be sure that all blanks are filled in.
Some dealers and lenders may ask you to buy credit insurance to pay off your loan if you should die or become disabled. Before you buy credit insurance, consider the cost, and whether it’s worthwhile. Check your existing policies to avoid duplicating benefits. Credit insurance is not required by federal law.
If your new auto dealer requires you to buy credit insurance for auto financing, it must be included in the cost of credit. That is, it must be reflected in the APR. Your state Attorney General also may have requirements about credit insurance. Check with your state Insurance Commissioner or state consumer protection agency.
Discuss the possibility of a trade-in only after you’ve negotiated the best possible price for your new auto and after you’ve researched the value of your old auto.
Check the library for reference books or magazines that can tell you how much it is worth. This information may help you get a better price from the dealer. Though it may take longer to sell your auto yourself, you generally will get more money than if you trade it in.
Service contracts that you may buy with a new auto provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and may or may not provide coverage beyond the manufacturer’s warranty.
Remember that a warranty is included in the price of the auto while a service contract costs extra. Before deciding to purchase a service contract, read it carefully and consider these questions:
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