Tag: auto loan

Save Money On Your Auto Loan

Car keys from a new auto.

We have to have a car to get by in our society and, for most of us, this means an auto loan. Getting a new car can be exciting and that unfortunately leads many people to make a lot of loan mistakes. They either allow themselves to be taken advantage of or they do not do the research and prep needed to get the best loan.

If you are about to take out a new auto loan, take a minute and learn what you need to do in order to get the best deal possible.

1) Get Your Credit In Order

The single biggest thing that you can do is get your credit in order. There are several things that you can do in just a few months that can get you some extra points on that credit rating and, believe me, every point counts.

First, you need to pull a copy of your credit report and check for errors. If you find an error, or anything that you do not believe is accurate, you will need to write the credit reporting agency and dispute it. They then have 30 days in order to investigate the matter. If they can not prove it, they must remove it.

Next, you should take a look at those credit card balances and try to pay them down as much as possible. Ideally, you want your card balances to be below 30 percent. This means that if you have 1000 dollars in credit, you should have a balance of no more than 300 dollars.

Use a credit monitoring service that has a simulator such as Credit Karma and see how much your score would increase if you paid down your balances. If you were planning on putting a down payment down, your money might be better spent on paying down your balances to get your score higher.

Finally, check out Experian Boost. You need to sign up for a free account with Experian but it may very well be worth your time. Experian Boost allows you to use your good bill payment history to increase your credit. You can add 20 points or more by showing that you pay your utilities on time every month.

2) Do Your Research

You should go into a vehicle search knowing which vehicle that you want. Do your research and choose one or maybe two different models that you would like.

Limiting your choices can allow you to thoroughly research the vehicles that you choose. You can know about features that you want, features to avoid and, most importantly, the current value of the vehicle. Get NADA values and also try to browse local classifieds as much as possible so that you know about the going rates.

One thing to also keep in mind is the historical resale value of a vehicle. This can have a big impact on the financing rate that you ultimately receive. Some vehicles just do not hold their value well. For a lender, that makes finanicng one of these vehicles much riskier. If you were to default, they would have a hard time getting their money back through repossession. Choose a vehicle that holds its value better like a Honda or Toyota and you will typically get a better rate.

3) Know Dealer Tricks

If you plan to shop at an auto dealership, there are several tricks that you need to know about. You know that you will need to haggle on the price of your vehicle, but there are a lot of other ways that a dealer makes a profit that you might not know about. Know them and you can save hundreds or even thousands of dollars.

The main thing that you need to know is that the dealer makes money on every part of the auto purchase process. They make money on the front end which is the purchase price but they also make money on the lesser known back end. Here are some examples.

Financing: If you finance through a dealership, they get a cut. They might present you with an offer for 8 percent financing when the bank really offered you 6 percent. The extra interest oes int heir pocket. Always ask for a lower rate than the dealer first offers you, never be afraid to send it back.

Warranties: Your dealer might be getting 50 percent or more of the warranty that they are offering you. If you want a warranty, you can negotiate the price down because they make huge profits off of them. Before committing to that warranty though, know what warranty that your vehicle already has. That dealer would be more than happy to sell you a warranty even if you still have a valid factory warranty.

Gap Insurance: Yep, they make money on this too. If you are going to be behind on the value of your vehicle, a gap policy is a good idea but know that it is negotiable.

In general, keep in mind that dealers make money on everything and everything should be negotiated.

FUN FACT: Your dealer may say that they can get you a lower rate if you get an extended warranty. This is very common and an easy way to negotiate a cheaper rate. If you do not want the warranty, you have 30 days from the time of purchase to cancel it for a full refund. The refund will be applied to your auto loan balance.

Is It Time For An Auto Loan Refinance?

an auto that needs a refi

Refinancing a vehicle loan can serve a lot of different purposes. Luckily, it is also one of the simplest things to do. Simply apply with a bank or credit union and they handle most of the details of transferring the title into their name. Simple is great, but how do you know if refinancing is worth the effort? Here are some cases where you might want to consider doing a refi.

Your Credit Rating Has Increased

If your credit score has gone up by more than 20 points since you received your vehicle financing, a refinance might be worth it for you. In most cases, a refinance will not cost you any money and it could save you in a few ways.

First, it could lower the amount of interest that you pay. Even if you only receive a 1 percent rate cut, this could add up in a big way. On a 30,000 dollar loan, it would give you a savings of almost 1,000 dollars over the course of a year.

Second, it can save you money on your car payment. The amount that you pay on principal will remain the same, but your interest payment will be reduced. Lowering your monthly bills is always a good thing and could free up more money for paying off other debt or for savings.

You Financed At A Dealership

When you finance at a dealership, with their finance department, you never really know what you are getting. They give you a rate, but you never know if it is the best rate.

The reason for this is that dealers make money on every part of the sales transaction. They take a cut of everything, including the interest rate. A lender might have offered you a 5 percent rate, but the dealer will quote you 7 percent. The extra money goes into their pockets.

So, if you financed from a dealer, unless you got one of those incredible zero percent finance deals, you should consider a refi. It is free to get a quote, so you might as well do it.

You Need A Lower Payment

If your finances have changed, a vehicle refi could open up some room in your budget. Interest rate reduction aside, simply stretching out the term can accomplish this.

Here is an example. If you had a 30,000 dollar loan for five years at 5% interest, your payment would be just over 560 dollars.If you have been paying on that loan for  a year, you have paid down the principal by around 5000 dollars. Refinance that loan for a new term of five years and cut your payment by 100 dollars a month.

You Need Someone Off The Loan

Situations change and you might need someone off of the loan. This might be because you had a cosigner and want to relieve them of their obligation or it could be due to a situation such as a divorce.

Refinancing your auto loan is a fast and easy way to get someone off of the loan. You might need to obtain a release from the person being removed, but it is well worth the trouble. In the case of divorce, it would be a good idea to handle this as soon as possible before too much equity is obtained in the vehicle.

You Want To Skip A Payment

If you are experiencing a minor financial hiccup, a refi could give you the time needed to get over it.

Perhaps you are starting a new job or need money to pay an unexpected bill. Whatever the case, if you need to free up some room this month, a refi may be able to help.

Most lenders will allow you to push your first payment off for up to 45 days. This time can be very beneficial, depending on your situation.

You Hate Your Lender

Sometimes, you might want to refi a vehicle simply because you are not getting along with your lender. Maybe their payment process is a hassle, they are charging fees that you did not expect or you just had a bad experience with customer service.

Moving your loan to a new lender could make your life easier or could allow you to just get away from a bad experience. If this is the reason for your refi, be sure to thoroughly investigate your new lender. You wouldn’t want to move from a bad situation to a worse one.

To Sum It All Up

There you have it, several reasons to refi a vehicle. If you identify with one of these six reasons, you should probably investigate a refi. With a minimum of effort, you could be able to solve a big problem or save a lot of money.