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Avoid Bad Auto Loan Deals With These 5 Easy Tips
By EchoBay Loans Staff Writer

Car shopping can be stressful enough without worrying about whether or not you're getting ripped off by a substandard car loan. By the time you get done negotiating with "Slick" the car sales guy, you're probably not really going to be in any shape to negotiate the details of your vehicle financing. At this point, most consumers will fill out the auto loan application and take whatever car loan is thrown their way. This mistake can wind up costing you big money and future headaches. Not every car loan is created equal and if you want your car-buying dollar to go further, you're going to want to follow the following guidelines.

First things first, check your credit report before applying for any car loan. The lower your credit rating, the higher your interest rate will be.
The difference in the interest rate between an A-credit auto loan and a sub-prime car loan could be over 10 percent. Order a copy of your credit report and look through it to make sure that all of the information reflected on the report is accurate. If there's any inaccurate or outdated information that has lowered your credit score, contact the credit reporting agencies and ask them to correct the report. Once the credit report has been corrected and updated and your credit score increases, you'll qualify for a lower interest rate.

Once your credit report has been cleaned up and you are ready to go car shopping, don't make the same mistake that so many budget-conscious consumers wind up making. Don't go into the car dealership stating a monthly payment that you want to stay within rather than the price you're willing to pay for a car. Many consumers who do this can actually wind up paying thousands more than they would have if they would have been negotiating from the bottom line rather than their monthly budget.

Know a car's value and what the dealer pays for it and negotiate from there. Negotiating on payment alone won't give you an accurate picture of what you're really paying for your car. Reliable sources for arming yourself with this information are Autoweb, Car.com, Autobytel,or CarsDirect.

For example, if your budget is $300 a month, that amount paid over a five-year period equals a lot more than that amount paid over a three or four-year period. If the monthly payment that you want to stay within exceeds the best deal the dealership could offer you, you can't trust the car salesman to point that fact out to you. If you're willing to overpay for the car, the salesman is probably going to be more than happy to overcharge you. Remember that they work on commission. The more money you spend, the more money they make.

If you have a trade in, consider selling it yourself. If that's not possible, then make sure that you don't discuss your trade in at all until the final price has been set for the car you are purchasing. Car salesmen love to play with numbers. If they know right off the bat that you have a trade in, they can rig the numbers to be very misleading. Instead, tell the car sales person that you're not sure whether or not you will be trading in your car and that you want to get the details of the purchase settled before discussing your trade in. If the sales person isn't willing to accommodate you, take your business elsewhere.

Another thing to consider is where you're going to get your auto loan. Depending on interest rates and dealer incentives, getting your loan at the dealership may not always be the best choice. Granted, if a dealer is offering zero interest over the life of the loan, it's probably a good idea to finance through them. However, analysts are predicting that we're nearing the end of the zero-interest auto loan trend and this means that you might want to begin looking elsewhere for your car loan needs.

If you belong to a credit union, check into their interest rates and compare them to the rates that the dealer's finance companies can provide you with. It's also always a good idea to check online loan lenders such as Eloan or Capital One. Interest equates to dollars, so make sure you're not being taken for a ride.

When you do settle on the car price and the lending institution that's right for you, make sure that you understand all of the terms of the loan and that there isn't a prepayment penalty. If you want to pay off your car loan early, it should be your business and you shouldn't be penalized for it. While loans with prepayment penalties may have lower interest rates, it'll wind up costing you more in the long run if you pay your car off early or trade it in before the loan term is over.

Even if you get an unbeatable deal on the purchase price of your car, it could all be for nothing if you lose the money you saved on the purchase price by getting bitten with the wrong car loan. By avoiding these common consumer pitfalls, you can help ensure that you don't make any car loan decisions that will come back to haunt you.


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