Do Your Homework – Finance the Right Way
The car buying experience can be an exciting time for drivers everywhere. Summertime can be a great time to purchase a new automobile, but if it is done the wrong way, you may end up paying more than you ever imagined. To be a smart buyer, you need to know the truth about financing. With all of the information available on the Internet today, it is tough for car dealers to sell cars with a huge mark-up. This doesn’t mean they aren’t making their money in other ways. If you decide to arrange the financing on your car through the dealership, be sure you have done your homework first. It could make a BIG difference.
Find the Best Rates Around
One of the best things to do before you get serious about buying a new car is look around to see what is the best finance rate you can get. Auto dealers often add significant mark-ups to the interest rates at which are buyers are approved for a loan. How does this happen? The auto dealer will contact a lender and get the interest rate that you are approved for depending on your credit score. This rate is called the buy rate. Some dealerships will disclose this rate to you, but many will not. Often times the dealership will quote you a much higher rate and pocket the difference as profit. The difference between these two figures is referred to as the yield spread premium.
To avoid something like this happening to you, be sure to shop around for the best finance rates available. Get quotes from local banks, credit unions or even credible Internet-based lenders. Once you have found these numbers bring them to the dealership with you, this way the dealer cannot charge you a large yield spread premium. If you cannot agree on a financing rate, do not leave the dealership before the financing is finalized. Leaving the car with un-finalized financing after making a down payment is known as spot delivery. This can turn into nothing but bad things for the consumer.
Consult more Honest Car Dealer articles for more car buying tips and advice!
July 19, 2012 by Jamie Rettig