For anyone who has struggled with their credit history, they know that re-establishing credit can be a challenge, and although some things can be paid for by cash, transportation is a basic need that often requires financing.
For those who have wondered about their eligibility for an auto loan, the good news is that bad credit car financing can be accomplished. The two mainstream approaches towards this to either apply on-line or through a local bank or credit union. The advantage of going on-line is the ability to find one site that will direct you to several lending institutions who are willing to quote you different rates and terms. This can be a real time saver as well as give you some choices.
Another option for securing an auto loan is to go through the financing department of a car dealership. It's important to know that although those extremely low advertised rates do exist, they are there only for those with the very best credit historys. Even with a bad credit history, the dealership may still pressure you use them for financing because the F&I (finance and insurance) person gets a commission for each agreement they put together. Dealership interest rates can have a tendency to be a little high to begin with. If you have bad credit, you may find a better deal somewhere else, so it's important to do a little comparison shopping.
The most productive way to find financing is go on-line and ask for quotes through an auto loan broker. You just complete an online form and then the broker will negotiate with the lenders to help you get you the most reasonable rates based on your credit score and employment history. Even with a poor credit history, if you are currently employed and can show your ability make the monthly payments, there should be a loan program for you somewhere
It is important to realize that although obtaining a car loan with bad credit is now much easier, there are some drawbacks. For example if your credit score is below a certain level (around 600), you will end up paying a higher interest rate. The lenders may also ask you to come up with a bigger down paymnt. Their reasoning is that they are taking on more risk by financing someone with a bad credit history and therefore must be compensated accordingly. One way to reduce your interest rate and monthly payment is to come up with a larger down payment.
Although it's tempting to get as many auto insurance quotes as possible, it's important to know your credit score can be lowered based on number of inquires. If you already have a low score based on a bad credit history, lowering your score even further would not be advantageous. The recommendation is that you submit your application to no more than three auto lenders.
Another temptation for those with with bad credit who want to own a car is to take over the payments from someone else. Usually these private-party sellers are desperate and can't sell their car through more traditional ways. The idea here is that you give them a monthly payment and they in turn continue to pay their lending institution.
Although it is possible to own a car this way, it is not recommended. If you try to obtain insurance on a vehicle you're not titled on, and the loan is in someone else's name, the insurance company probably won't cover you. If the seller tries to keep their insurance going, just adding you as a driver, their insurance may be cancelled because the vehicle is not in the seller's possession. If the seller forgets to tell you, you could be uninsured without even knowing it.
Car financing with bad credit isn't impossible. There are many traditional financing options you can still use to buy a vehicle, and once you show yourself credit worthy by making all your payments on time, it will be easier to buy that next car at a much better rate..
Understanding dealer holdbacks- a key to your negotiations.
If there's one thing a good car salesperson knows how to do, it's working an angle they think will cause you to give up on your negotiation efforts. One of those angles is to convince you that they can't possibly give you that dream car at straight invoice. I mean, how are they going to be able to put food on the table if they keep taking those kinds of losses? The truth is is that many of those car salespeople will be eating very well from the profits they make off buyers who won't understand the dealership's profit structure.
One of the perks that manufactures give dealers is what is referred to as a holdback. This means that on a typical car that lists for one price and invoices at another, the manufacturer will hold back a percentage of the profit (2-3% depending on the manufacturer). This means that the dealer can add that amount onto the invoice price, showing the buyer where 'tissue' is (a new invoice price) only to get the same amount back from manufacturer when the deal is done.
Knowing that there is a holdback on a car helps you know what the true cost of the vehicle is, which in turn helps your bargaining position. To ignore it is to leave money on the table.
One of the perks that manufactures give dealers is what is referred to as a holdback. This means that on a typical car that lists for one price and invoices at another, the manufacturer will hold back a percentage of the profit (2-3% depending on the manufacturer). This means that the dealer can add that amount onto the invoice price, showing the buyer where 'tissue' is (a new invoice price) only to get the same amount back from manufacturer when the deal is done.
Knowing that there is a holdback on a car helps you know what the true cost of the vehicle is, which in turn helps your bargaining position. To ignore it is to leave money on the table.
They're not going to just give this new truck away, but...
One question that seems to pique consumers' curiosity is whether there are any hot sposts within the sales cycles of car dealerships that can result in significant price breaks for potential buyers. Or to phrase it another way, 'Are there certain times of the year, with some makes and models, where you can negotiate a price that some might call 'embarrasingly low' (embarrasing for the dealerships)?' The answer to that question is a definite, "Yes", and today I'll talk about just one of these hot spots.
You may have heard that year-end sales are a prime time to buy a new vehicle as dealers are trying to move their old stock and get ready for next year's models. This is more than just rumor, but is a truth based on industry quirks and sometimes goofs. For example, outside of the normal yearly model transitions, if there have been certain models that have been slow sellers and parked in the manufacturer's back lots, there are going to be pressures from the manufacturers to the dealerships to take their surplus, 'move the iron' and get these "leftovers" into buyer's hands.
If you are willing to consider a make/model that has been clearly over-produced, these slow movers could allow you to negotiate some hefty discounts. Case-in-point is a table below provided by the auto industry (12/1/07) that lists some year-end pickup trucks piling up in the manufacturer's and dealer's lots. The higher the inventory, you can bet the more the model is going to be heavily advertised and incentivized, which could mean a great deal for you.
Outstanding inventory in units ending December 2007:
Chev Silverado - 233,800
GMC Sierra - 82,900
Dodge Ram - 117,200
Ford F series - 186,100
Nissan Titan - 21,100
If you are flexible on the type of vehicle you drive, you can find some killer year-end deals. When you start seeing the heavy marketing on a vehicle like the Chev Silverado (look for the advertising blitz), you know the dealers are going to be chomping at the bit to negotiate. Of course they're not just going to give it away, but you can still walk away with the satisfaction of knowing that you've bought a great vehicle at a competitive price.
You may have heard that year-end sales are a prime time to buy a new vehicle as dealers are trying to move their old stock and get ready for next year's models. This is more than just rumor, but is a truth based on industry quirks and sometimes goofs. For example, outside of the normal yearly model transitions, if there have been certain models that have been slow sellers and parked in the manufacturer's back lots, there are going to be pressures from the manufacturers to the dealerships to take their surplus, 'move the iron' and get these "leftovers" into buyer's hands.
If you are willing to consider a make/model that has been clearly over-produced, these slow movers could allow you to negotiate some hefty discounts. Case-in-point is a table below provided by the auto industry (12/1/07) that lists some year-end pickup trucks piling up in the manufacturer's and dealer's lots. The higher the inventory, you can bet the more the model is going to be heavily advertised and incentivized, which could mean a great deal for you.
Outstanding inventory in units ending December 2007:
Chev Silverado - 233,800
GMC Sierra - 82,900
Dodge Ram - 117,200
Ford F series - 186,100
Nissan Titan - 21,100
If you are flexible on the type of vehicle you drive, you can find some killer year-end deals. When you start seeing the heavy marketing on a vehicle like the Chev Silverado (look for the advertising blitz), you know the dealers are going to be chomping at the bit to negotiate. Of course they're not just going to give it away, but you can still walk away with the satisfaction of knowing that you've bought a great vehicle at a competitive price.
How cheap auto insurance can end up being not so cheap
Just because your insurance company has been giving you some cheap auto insurance on your current vehicle, don't assume they will be just as competitive on a new vehicle purchase. Different companies charge different rates on different vehicles depending on the variables they place the most weight on.
Say if you are a family of three with only two vehicles, a young driver in your family may have only been rated as a part-time operator. With the addition of a third vehicle, most companies will force the young driver to be classified as a principle operator (three cars for three drivers), which could cause your insurance rates to skyrocket. The fact is, is that where your current company may have excelled with part-time, young driver rates, their insurance rates could go through the roof if your young driver is re-rated as a principle operator.
Whether or not you fit this scenario, it never hurts to shop around a little for the most competitive auto insurance quote before adding a new vehicle to your insurance policy. If you're happy with your current insurer because of great accessibilityor responsive claims handling, then maybe you won't care. But if you find out you could save yourself a few hundred dollars by changing insurance providers, then maybe it's time for a change.
Say if you are a family of three with only two vehicles, a young driver in your family may have only been rated as a part-time operator. With the addition of a third vehicle, most companies will force the young driver to be classified as a principle operator (three cars for three drivers), which could cause your insurance rates to skyrocket. The fact is, is that where your current company may have excelled with part-time, young driver rates, their insurance rates could go through the roof if your young driver is re-rated as a principle operator.
Whether or not you fit this scenario, it never hurts to shop around a little for the most competitive auto insurance quote before adding a new vehicle to your insurance policy. If you're happy with your current insurer because of great accessibilityor responsive claims handling, then maybe you won't care. But if you find out you could save yourself a few hundred dollars by changing insurance providers, then maybe it's time for a change.
Answering the, 'which car should I buy?' question.
With the myriad of makes and models that are out there these days, trying to figure out which vehicle is the right one for you can be akin to trying to solve Rubic's Cube, blindfolded. There are so many combinations and competing claims, where do you begin?
As with any process involving a major purchase, the first step should involve starting some research by reading as many reviews as possible while thinking about what your most important need or desire is in a vehicle. Maybe you feed on speed, or require compactness for easy parking. Perhaps storage capacity or reliability ratings are at the top of your list. Or maybe it's power, safety, luxury, gas mileage or passenger capacity. Reasons for choosing the vehicles that people do can vary greatly within the spectrum of desire vs need, so it's important to think about and rank your priorities. You can even create a 1-10 list of the most important to the least important benefits or features, and then decide which ones you can cross off the list, if any.
Just remember that although it's possible to find your perfect car or truck, the reality is that it often involves some trade-offs. What you may gain here, you may lose there. As long as you pick your top three-to-five features and stick with them in your vehicle search, there's no reason you can't be happy with your purchase.
As with any process involving a major purchase, the first step should involve starting some research by reading as many reviews as possible while thinking about what your most important need or desire is in a vehicle. Maybe you feed on speed, or require compactness for easy parking. Perhaps storage capacity or reliability ratings are at the top of your list. Or maybe it's power, safety, luxury, gas mileage or passenger capacity. Reasons for choosing the vehicles that people do can vary greatly within the spectrum of desire vs need, so it's important to think about and rank your priorities. You can even create a 1-10 list of the most important to the least important benefits or features, and then decide which ones you can cross off the list, if any.
Just remember that although it's possible to find your perfect car or truck, the reality is that it often involves some trade-offs. What you may gain here, you may lose there. As long as you pick your top three-to-five features and stick with them in your vehicle search, there's no reason you can't be happy with your purchase.
It's hot, it's fast, but can you really afford it?
So you're ready to buy that dream car, but not sure how to begin? The first step is to figure out your budget before you even start looking. It's easy to want that hot speedster or luxury SUV, but if you don't have any food on the table after making the monthly payment, then maybe you will need to downscale a little. Knowing how much you can afford before you make that purchase will save you some head-aches down the road, along with giving you good checks and balances before walking into the deal.
One easy tool that works well in budgeting for a vehicle are the free, on-line payment calculators. Most banks and credit union sites will have these. Just plug in your interest rate and desired monthly payment, and it will tell you how much car you can afford. Or, you can input the vehicle's estimated purchase price (be sure to include sales tax), and it will give you your monthly payment. Knowing what you can afford before you sign on the line will help you breath a little easier once that monthly payment coupon comes.
One easy tool that works well in budgeting for a vehicle are the free, on-line payment calculators. Most banks and credit union sites will have these. Just plug in your interest rate and desired monthly payment, and it will tell you how much car you can afford. Or, you can input the vehicle's estimated purchase price (be sure to include sales tax), and it will give you your monthly payment. Knowing what you can afford before you sign on the line will help you breath a little easier once that monthly payment coupon comes.
Subscribe to:
Posts (Atom)