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Auto Finance: Your Second Checklist

Auto FinanceMany aspects of auto finance are common considerations during the application phase, such as the fees and interest rate being offered by the lender. While it’s certainly important to evaluate the loan terms in regard to how much it will cost you, here are some other aspects you need to keep an eye on to ensure you’re getting a fair deal.

Ignore the Pressure
Car dealerships often have relationships with lenders and may push those services to close the deal and encourage their financial ties. But you may get better loan terms, including a lower interest rate, from a local credit union or your current bank.

Politely, but firmly, tell any car dealer salespersons that are pressuring you into using their financing that you need to comparison shop first. The dealership representative should give you time to get comparisons, as it’s in your best financial interest.

If a salesperson indicates the deal will not be available if you take a day or two to get rate quotes, consider going through another dealership instead. Dealerships with dishonest business practices regarding financing often threaten to end or stall transactions if the buyer won’t use their financing partner.

Get the Approval in Writing
Car auto loans often advertise financing deals with very favorable terms, but those terms are usually available only to those with excellent credit, according to the New York City Department of Consumer Affairs. Pre-approval means you may qualify for the loan but the lender has yet to finalize it and can rescind the offer.

Make sure you have the loan approval in writing, with all the terms clearly detailed and matching what you discussed with the lender. Never sign a loan agreement without reading the document in its entirety. If you notice a mistake, insist a new agreement be prepared with the current information. Don’t sign an agreement with errors even if the lender promises to fix the mistakes later, as you’re legally bound to the incorrect terms once you sign.

Don’t Stack Your Loans
Loan stacking occurs when you combine the balance of a loan from an old car you’re trading in and the financing of your new car together. Dealers often offer this arrangement through lenders to people who want to¬†buy cars but currently have a vehicle that’s worth less than their original loan balance.

While loan stacking may seem like a solid idea financially, you’ll pay more in interest over the life of the combined loan if your new loan carries a higher annual percentage rate than your old one. Delay the car purchase and pay off your old debt first.

Ask Questions

Don’t be afraid to ask the loan officer any questions you have about the loan terms or the wording in your proposed agreement. A representative from the lender should be made available to you prior to signing any final loan documents. If you’re denied access to a representative or can’t get clear answers to your questions, use another lender.

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