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  Car Financing: Tips and Information  

Purchasing and paying for a new car doesn't have to be intimidating. Beyond the acquisition of a new home, bringing a new vehicle into your life is the largest purchase most people will ever make. So it makes sense to do your homework before you approach the car dealership, develop a plan of action, and then keep your wits about you as you negotiate.

Know Your Credit History
If you haven't done this in the past year, log on to annualcreditreport.com and get a free credit report from all three major credit reporting agencies. Make sure the information is correct and file a dispute if it isn't. Clear up any collection items that may be listed and pay down some of those credit card debts. The best interest rates go to those with the best credit history. It may take time to clear up some of those issues on your credit report, but it is well worth your while in the interest shopping department.

Save Up for A Down Payment
Oftentimes, the best interest rates are not only reserved for those with good credit scores, but also for those with a down payment on a vehicle. Aim to pay at least 20% of the value of the new car up front, either with a trade-in or cash. Not only will you get a better interest rate, but you will have a better chance of avoiding being upside-down on your loan. That is, owing more than your car is worth!

Shop Around
The dealer does not always have the best interest rates available. Before you go car shopping, stop in at your local bank or credit union to inquire about pre-approval and determine what interest rates they can offer you. Have a good idea of what you want to purchase, what the value of your trade-in is, and what your total loan amount will be. This research can be done with the help of NADAguides.com or other online car valuation websites. Your local financial institution can then give you a good idea of what they can offer you in terms of loan rate and term.

Negotiate a Good Deal
Approach the dealership with your research and negotiate for a fair price on the vehicle that you desire. If they attempt to offer you low interest financing, it may or may not be a good offer. Do the math! How much interest will you pay if they give you $3,000 cash back versus paying 0% interest on the full price car. If you pay less interest than $3,000 take the higher interest financing and the cash back. If they can't offer you a good financing deal, then turn back to your pre-approved bank or credit union loan. Never negotiate a car deal based on monthly payment amounts. Yes, you need to know what you can afford each month, but you will get burned if you agree to pay $250 a month over 6 years versus $300 a month over 5 years. Know how much interest you are paying over the life of the loan and aim to keep that to a minimum, not your monthly payment!

Pay Your Bills
After you've secured your auto financing, remember to make that monthly payment and keep your credit history solid for your next major purchase.

Avoid the Finance Department
After you've paid off this car, see if you can't stand to keep it in your garage a little longer. Take that monthly payment you've been sending to the bank or the dealership financier and put it in an interest-earning savings account. Do this for a few years and you'll be well on your way to paying for an upgraded car in cold hard cash. Imagine driving off the lot in a new car knowing that you don't owe anybody for it. Keep these simple tips in mind and you will be well on your way to being considered a savvy negotiator who commands respect. It's your hard-earned money spend it wisely!