Auto Loan Financing - Part IV

Here are some auto loan financing tips to follow before, during and after your visit to the auto dealership...

Before Visiting the Dealership:

Evaluate your financial situation and determine how much you can afford to pay each month. A longer-term auto loan contract may mean smaller monthly payments than a shorter-term contract (if all other terms are the same) - but will result in more money paid over time on your contract.
Determine the price range of the vehicle you're thinking of buying. Check newspaper ads, the Internet, and other publications.
Understand the value and cost of optional credit insurance if you agree to purchase.
Know the difference between buying and leasing a vehicle.
Be aware that your credit history may affect the finance rate you are able to negotiate. Generally, you'll be able to get a lower rate if you've paid your monthly credit obligations on time.
Compare annual percentage rates and financing terms from multiple auto loan sources such as a bank, finance company and credit union. This information may also be available from the finance sources' and vehicle manufacturers' Web sites.

When Visiting the Dealership:

Stay within the price range that you can afford.
Negotiate your auto loan or auto leasing arrangements and terms.
Consider carefully whether the transaction is best for your budget and transportation needs.
Understand the value and cost of optional products such as an extended service contract, credit insurance or guaranteed auto protection, if you agree to purchase. If you don't want these products, don't sign for them.
Read the loan or leasing contract carefully before you sign. You are obligated once you have signed a contract.

After Completing the Auto Loan Purchase or Lease:

Be aware that if you financed the vehicle with an auto loan, the assignee (bank, finance company or credit union that purchases the contract) holds a lien on the vehicle's title (and in some cases the actual title) until you have paid the contract in full.
Make your auto loan or lease payments on time. Late or missed payments incur late fees, appear on your credit report and impact your ability to get credit in the future.

If You Encounter Financial Difficulty:

Talk to your creditors if you experience difficulties making the monthly payments on your auto loan or lease. Explain your situation and the reason your payment will be late. Work out a repayment schedule with your creditors and, if necessary, seek the services of a non-profit credit counseling agency.
Know your obligations. A creditor or assignee may take the vehicle in full satisfaction of the credit agreement or may sell the vehicle and apply the proceeds from the sale to the outstanding balance on the credit agreement. This second option is more common. If the vehicle is sold for less than what is owed on your auto loan, you may be responsible for the difference.
Be aware that repossession can occur if you fail to make timely payments. It does not relieve you of your obligation to pay for the vehicle. The law in some states allows the creditor or assignee to repossess your vehicle without going to court.

For More Information

To learn more about auto loan financing, visit The Federal Trade Commission's Consumer Information Web page.

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