Auto Financing

Choosing the Best Auto Financing

You've finally found the perfect car and are ready to sign on the dotted line. Sounds pretty easy doesn't it? Actually, the real work may be just beginning. Choosing the right auto financing could be as tough as deciding on the car in the first place.

Let's look at some choices you may have in the world of car financing

Dealerships almost always their own financing program. It may be convenient, but it may not be the best in the long run. For one thing, dealers will try to talk you into extras like extended warranties and options for the car, since the finance manager is often being paid a commission on any extras he can sell you. Compare their interest rates with those of lending institutions.

The second option is your bank or credit union. If you've already established a relationship with them, especially if your credit history is good, then this is probably your best bet for auto financing. Just make sure you get the best interest rate you can.

You may be in a position to borrow the money for your car from a relative or friend. This is great, as the interest may be a lot less. If you choose this route, just make sure you will be able to make all your payments and on time. In fact you should really draw up a legally binding contract as one means of protecting your relationship with them.

Some people borrow on the equity they have built up in their homes. While this is a viable option, remember that you may be signing on to pay for your car over the next 20 or 30 years. It's pretty safe to say that you won't even be driving it at the end of the loan period.

As with nearly everything else, there are numerous websites where you can finance your new or used automobile. Since you don't know these people, be careful to ensure that they are legitimate. Check with the Better Business Bureau (BBB) and also the security symbols at the bottom of their page. Having reputable security and endorsement generally means that the site is trustworthy.

Other things to take into consideration when choosing how to finance are rebates and interest rates. Generally the better your credit and the shorter the contract you are willing to sign, the lower the interest will be. Also interest rates on new cars are less than those for used. Rebates are usually from the factory and belong to you when you purchase the car. Dealers may try to talk you into building that into your down payment. Be armed with facts and figures when you walk in to the dealership. There are many websites that can help. Two good ones are http://www.edmunds.com/ and http://www.intellichoice.com/. Read car magazines and review publications or websites such as Consumer Reports.