How to Secure the Best Financing on a New Car

Unless you live in a city with an exceptionally strong mass transit system, a car is probably a necessity. Because automobiles do tend to depreciate over time, they're also an investment that you'll need to make several times over the course of your adult life. When the time comes to make a new car purchase, many people don't have the available liquid funds to make an outright purchase. The only remaining option, outside of leasing, is to finance the purchase. Securing a loan is a bit more difficult in a post-lending crisis society, but it's not impossible. It's also not impossible to secure a great deal on your loan, provided you arm your self with enough relevant information before making a purchase.

Be Aware of Your Credit History?
Even if you know that your credit isn't perfect, you still need to know exactly where you stand before you start talking financing with a lender or dealership. Checking with all three of the major reporting agencies, Equifax, TransUnion and Experian, not only gives you an accurate view of your credit history but also the chance to dispute inaccuracies and make amends for old debts you may have forgotten. In the end, you will almost certainly end up paying more for financing when your credit report bears a few blemishes, so make sure that you're aware of where you stand before you start shopping.

Don't Take the First Deal You Find
You're not likely to buy the first car you see at the first lot you visit, and you shouldn't strike up a deal with the first lender who offers you financing for that vehicle. Take your time and shop around, because it's the only way you'll be able to get the best possible deal. Make a point of comparing offers, and think twice before accepting a loan straight from the dealer. In fact, you should make a point of getting preapproval before you even start visiting dealerships so that you know exactly how much you can spend and what your payment will be before you sign any documents. The Internet isn't your only source of information or options, either. Check with your own bank. local credit unions and other lenders in your area.

Keep Inquiries to a Minimum
Every time your credit history is accessed, your credit score will suffer a bit. The exception to this rule is that multiple lenders can pull that history over the course of fourteen days and it will count as a single inquiry. While it's wise to take your time about accepting a deal, you'll need to make sure that you close on a financing deal within two weeks of the first inquiry. The last thing you want when you're trying to get the best deal is a damaged credit rating simply because of temporary damage from multiple inquiries.

Think Twice About Dealer Financing
When you visit a car dealership, many salespeople will assure you that they offer financing through several lenders and that they will even pay off a balance on your existing vehicle. What they may not tell you is that they're allowed under current laws to increase your interest rate in order to compensate themselves. Preapproval from another lender is not only a great bargaining chip while you're hammering out a price on a new car, but can also save you money in the long run by saving you from dealer financing. Additionally, the Center for Responsible Lending suggests that buyers be aware of "yo-yo" financing tactics that are commonly practiced by financing departments of dealerships. A dealership representative may offer conditional financing so that you're able to drive away from the lot with your new car, but what they don't tell you is that they may be extending this financing with full awareness that you won't qualify. Days or, in some cases, weeks may pass after your purchase before you receive word from the financing office that your interest rate was not approved. In the end, you may be forced to accept a much higher interest rate than the one you agreed to, or be saddled with inflated "rental" or wear and tear charges. To avoid these tactics and get the best possible deal on dealer financing, refuse to accept delivery of a new car until the financing is completed and the contracts finalized.

To make sure that you're getting a great deal on a new car, the best thing you can do is to educate yourself regarding the financing process and arm yourself with as much knowledge as possible. An educated consumer is less likely to be deceived or taken advantage of, and doing a little bit of research can translate to very real savings in the long term.

Resources:
http://www.consumerreports.org/cro/2012/12/how-to-get-the-best-car-loan/...
http://banking.about.com/od/loans/bb/autoloans.htm