Auto Financing

Up and Running

With all of the tribulations that have plagued the automobile industry, the manufacturing industry, and the entire economy, the automobile industry wants you to know that car loans are available to finance a new car purchase. From the looks of television and printed ads for December of 2008, it is business as usual if you are looking to buy a new car. Although dealerships are closing and auto makers are delaying the release of some new models, they are more motivated than ever to get you into a new car.

The Approved Credit Clause

Taking this on face value, a new car buyer might be able to get a pretty good deal on a new car, with many dealers offering zero percent interest on approved credit. Your credit rating will determine whether or not your new car loan will be written with zero interest. You may find that, without the best rating, you’ll end up paying interest on your loan. You will also find that new car financing is now spread out over a longer term, some at 60 months, making the interest issue even more costly. When you sit down to negotiate the price, base it on the invoice price, not the MSRP, which can be misleading.

Upside Down Auto Loans

If you finance your new car purchase, try to arrange a shorter term, and put a larger down payment on the car. By doing this, there is less chance of getting upside down on your loan; owing more than the car is worth come trade-in time. With trade-in value at an all time low, keeping your car after it is paid off can reap multiple rewards; no car payments and lower car insurance rates. If you decide to pay off your loan sooner than the term, check for prepayment penalties that can rain on your parade.

Consider Trade-in Value when Buying

While you might be tempted by prices dropping to consider SUVs, resale value on them is also dropping thousands of dollars a month. Some dealers will not even accept them in trade. According to ForbesAutos.com, the three vehicles with the best resale value for 2008 are the BMW 1 Series, the Infiniti G37, and the Cooper MINI, keeping approximately sixty percent of their initial value after three years.

Borrow With Caution

Look closely at your budget before borrowing for a new car. Consider all of the vehicle’s operating expenses, including insurance before committing yourself to four, five or six years of monthly payments. By financing a new car purchase, you are paying for the convenience of getting that car now instead of saving up and paying for it outright. That can be a good thing if you keep other debt in control and manage your budget carefully.