How to Avoid Paying Through the Nose for a Car Loan
- “100% Guaranteed Approval” is often a lie. Actually, you’re approved only if you are willing to make a big down payment and willing to pay obscene interest rates.
- The card dealers play the spread (and play you for a fool) using an “Auto Industry Select” credit score and the standard FICO score.
- If you did not reaffirm your vehicle in bankruptcy, it may be possible to finance it at a lower cost instead of getting another vehicle. If you did not reaffirm, then the debt obligation is eliminated, but the finance company still has a lien on the title. By not reaffirming, the car loan will show up as a “0” balance.
- Your credit report will show only one inquiry even if if the dealer applies for credit with multiple lenders, as long as it’s done in a 45-day window. Likewise, if you apply for credit with more than one vehicle lender in a 45 day window, it will show up on your credit as only one inquiry with little effect on your credit score
- Avoid fake car loans which are carefully disguised finance contracts. Finance contracts are “coded” by credit bureaus and they will hurt your credit score. Get an installment loan which is based on a fixed number of payments over a fixed number of months where the balance is paid in full during the term of the loan.
- You can obtain what is called a “split” installment loan. One loan is higher than the other. You pay off the lower loan in 12 months and your credit score skyrockets your credit score even more than if you had just one loan. Then you refinance the other loan at a lower cost.
- Be careful of trade tricks where you end up getting screwed on the “front end” and the “back end” while the dealer makes a profit big enough to fund a small army!
- Some dealers will warranty their used vehicle at no cost while others will offer bogus warranties and services which you pay through the nose for yet they are not worth the paper they are written on.