Auto Finance

Consider the options of automobile financing before signing on the dotted line
By Michael Berman Taking possession of that new or used car begins when you enter the dealership and ends when you shake hands. It's what happens in between, especially what automobile financing options you choose, that determines how you purchase that automobile.

Consider your options carefully, weighing affordability and your budget constraints before making a decision. Basically there are three options open to you:

1. You can finance the car through an automobile finance company, the dealership or your bank.
2. You can lease the car.
3. You can pay cash.

If you decide to finance the car, this leads to more decision-making on your part.

1. Do you use a bank and possibly get a lower interest rate?
2. Do you take advantage of the convenience of automobile financing through the dealership, although the interest rate may be a couple of points higher?
3. Do you deal with an automobile finance company that may be a bit more liberal in giving you the money, especially if you have a questionable credit rating?

Get current rates of auto finance lenders

Know what the interest rates are with automobile finance companies and banks before entering the dealership so that you're prepared to "haggle" with the dealer. Rates can change on a daily basis, so it's advisable to check them just before taking out an automobile loan.
Try:  Many websites give current interest rates for automobile financing. Some, such as Bankrate.com also include rates for less than perfect credit and give you links to automobile financing companies and banks. Another good source of information is Yahoo! Finance, which narrows down the rates to your area.

Check with national automobile finance companies

To remain competitive, many national automobile finance companies have cut their rates. This could be an attractive option if you have good credit.
Try:  Join the American Automobile Association (AAA) and possibly get a discount on financing your car. AAA deals with banks and auto financing companies so you don't have to. One of the top auto finance companies for those with less than perfect credit is Credit.com.

Deal with the dealer for flexible auto financing

Many times automobile dealers offer incentive deals with lower interest rates than you can get from banks or finance companies. You can find good deals in newspaper advertisements, but often these are just available to those with perfect credit. Dealers tend to be more flexible with their automobile financing programs.
Try:  Check out the latest rates for General Motors cars at the GMAC website. There are tons of other car makers that have their own auto finance companies including the Ford Motor Co., Chrysler, and Toyota.

Fix your credit before you talk to auto finance lenders

Check with the three major credit reporting agencies for any discrepancies on your credit reports, and dispute these errors for a chance at a lower interest rate from auto finance companies.
Try:  Contact Experian, TransUnion and Equifax to obtain copies of your credit reports.

• If you can afford higher payments, take out a shorter term loan, which often has a lower interest rate. Automobile financing usually runs from 36 months to 60 months.