Negotiating Car Installment Cautions

In fact the dealership and the salesman do their best to sell a car by going back and forth with the customer over the monthly payment. They use a technique that is commonly called “Packing the Payment” which is a standard practice among automobile dealers for negotiating car payments. To give you an idea of how packing the payment works it’s easier to use an example. Let’s say you have selected a vehicle to purchase that is priced at $20,000 and your credit qualifies you for a 5% interest rate for a term of 60 months. To simplify this example we will say that the sales tax, title and license fees are all included in the $20,000. So if you calculate the payments for the term and interest rate shown above the payment should be approximately $377 a month for 60 months.

As a way of packing the payment the sales manager may use an 8% interest rate and a $22,000 price which would come out to be $446 per month for 60 months. Now the car salesman presents the payments to the buyer and the buyer will negotiate lower car payments. The buyer and the salesperson will go back and forth and maybe settle on $415 a month. The buyer feels that they have made a good deal because they negotiated the payments down by $31 a month when in fact they will be paying $38 more than they need to pay (the difference of $415 and $377). Unless you have a financial calculator with you or you have calculated approximate payments before visiting the dealer you would never know.

Now when it is time to sign your papers you should be able to spot that something is not quite right if you are paying close attention. That $38 a month over 60 months comes to $2280 and these extra charges need to be shown on the contracts or car buyer’s order somewhere. It might be in the price of the car or it could be in the way of a higher interest rate. It may even come in the way of having the business manager selling you an extended warranty for only $15 a month to bring your vehicle payment up to $430 a month and then including the warranty on the paperwork for $2280 plus the actual price of the warranty. It could be in several different places, but this is what can happen when you are negotiating low car payments rather than the price.

You may be looking for advice on negotiating low car payments, but this one area where the car dealers can make thousands of dollars in additional profit. When your focus is all about the amount of the car payments it is easy for you to get taken. The best advice I could give that will keep you from paying more than you need to pay is to do your due dilligence before you visit the dealer. Take a look at the steps to buying a car for a step by step guide to preparing and doing the research you need to do before you get clipped by your local car dealership. You will find informative articles and posts that will provide you with an inside look at the methods car dealers use to get your money and my recommendations for bargaining on car payments.

The national average credit score at the time of this writing is 692 which is lower than it was only a few years ago. However when it comes to buying a car the automobile lenders consider anything above 700 to be a good credit score although some of the auto maker’s financing divisions require a 720 to qualify for the best rates. That is not to say that you can’t get an auto loan with an excellent rate because you can and people are doing it every day.

Car Buying Power vs. Credit Score

Credit Score: 720-849 – A score that falls into this range is considered excellent by automobile lenders and you will qualify for the best rates and longest terms. You will be entitled to any programs and special incentives that the auto maker or lending institution may have available and a down payment is rarely required. Lenders want to lend you money to purchase a car.

Credit Score: 680-719 – This is recognized by most auto lenders to be a good credit score to buy a car. Some banks, credit unions and automobile manufacturer’s finance departments may require a 700 score to get the best finance incentives, but most of them will include anyone with a 680 score or above.

Credit Score: 620-679 – Some creditors believe this to be a good credit score, but for many of the auto lenders a score under 680 does not qualify the car buyer for the best rates. A person can still buy and finance a vehicle, but their interest rate may be a couple of points higher and the term of the loan may be restricted to a shorter period or require a down payment. Often the car makers offer a rebate in lieu of special financing rates to compensate and reduce the cost of financing.

Credit Score: 580-619 – No matter who the lender this is considered a poor credit score. It doesn’t matter if you are buy a car or anything else. There are still financial institutions that will lend you money to purchase a vehicle, but you will pay a premium price when it comes to the interest rate on your loan. Typically you will be required to make a down payment and the term limit will be 60 months or less depending on the vehicle, price paid, down payment and credit history. Sometimes the only auto lender that may approve you for the loan is a sub-prime lender that specializes in car loans for people with poor credit.

Credit Score: 500-579 – When your credit score is in this range lenders are hesitant to grant you a car buying loan. There are lenders that will, but they are sub-prime lenders and a down payment of some kind is required. They limit the amount they will lend based on your income and down payment. These types of auto loans are usually reviewed on a case by case basis that also looks at your credit history. I have seen many people buy and finance cars with a credit score in this range, but their interest rate was always double digit and they were required to put down $1500.00 or more depending on the vehicle, mileage and the length of time on their job.

Credit Score: 300-499 – This is a bad to very bad credit score and the best option for buying and financing a car is at one of the many Buy Here Pay Here car dealers scattered across the country. They specialize in low credit score car buying and financing. They have what is commonly called in house financing. This is where the car dealer finances them and the payments are typically made on a weekly basis right where they bought their vehicle.

After going over the above credit tiers you should have pretty good idea of what is a good credit score to buy a car. Having an automobile at your disposal is a necessity today and therefore there are options for buying a car no matter what your credit standing. Knowing your credit score is one way of avoiding any car dealer scams and paying too much. There are more ways to save a fortune on a vehicle in the steps to buy a car.

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Considerations of Refinancing a Car Loan

Before you run out and try to refinance your auto loan you need to do some homework to determine if a new auto loan is right for you. Your first consideration is the interest rate of your current auto loan versus the interest rate that you could get from another lender. You could talk to your local bank and get a rate quote or you could get a few quotes online at Lending Tree, which I have found to be the easiest and quickest way to get several competitive quotes. You can click here and get several quotes for free (link will open in a new window).

Refinancing a Car Loan Details

Now if you got a better interest rate quote than what you are currently paying the next step would be to check the value of your vehicle. Regardless of whether you bought a new or used vehicle from the car dealer the value of your vehicle will be less than you paid. You should go to Edmunds.com and check the value of your automobile and determine the value, not the retail amount, but the trade-in or wholesale amount.

Refinance a Car Loan the Numbers

If you bought your car without a down payment there is a very good chance that you will be upside down (meaning you owe more than your car is worth). If that is the case you will need to pay down the balance before another lender will refinance the car loan. Generally lenders that refinance a car loan will only finance 80% of the value. Now take 80% of your vehicles value and compare that to what you presently owe on your car.

How did your numbers come out? Does the 80% cover the payoff or is the payoff more than 80%. In many cases refinancing a car loan would require you to add money when you refinance. This is something you need to know before you get too far. You might be able to lower your payments, but if you have to add a few thousand dollars to lower them it might not make sense for you and your budget.

Now wait, I am not done yet. You also need to take into consideration any fees that may be involved in refinancing a car loan. There will be a title transfer fee, there could be an early payment penalty depending on the lender that holds your current auto loan and the new lender may charge a fee for a new auto loan or a documentation fee.

You can see that it as not as simple as it sounds to refinance a car loan as it sounds. However, if all the numbers line up you may be able to reduce your payments, term and overall expense versus you current car loan. The lesson to be learned is to read everything and know what you are signing when you finance a car and you won’t have to worry about refinancing.

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If you or someone you know should find them asking that question you should know buying a car after bankruptcy is possible. There are many times where people are forced to file for bankruptcy by no fault of their and that is very unfortunate, however that is not the subject here and subject of this post is to provide some information for those that need to move on and make fresh start.

Options for Buying a Car after Bankruptcy

I don’t mean to sound like a smart a** here, but the easiest way to buy a car after bankruptcy is to pay cash. You might say that you are broke and you don’t have any cash to buy a vehicle, but whether you finance or pay cash you will need some cash to buy a car. Let’s look at this a little closer, if you need a car to run local errands and commute to a local job, buying a cheap used vehicle might be the answer. It might not be new and impressive, but it might be a good idea to find a private party that is selling a used car for a couple thousand dollars. If you could make this work for a while you will be money ahead as you will see shortly.

If your job requires you to have use of an automobile, drive clients around or you travel a long distance to work every day or if you just can’t do it then a cheap used car is not a feasible solution. So your next option is to buy a new or at least newer car that is dependable and appropriate for the ways you use your automobile. With that being the case you will need to buy a car after bankruptcy, but you will also need to finance your vehicle.

Financing and Buying a Car After Bankruptcy

There are lenders that will allow you to finance and buy a new or used automobile after your bankruptcy, but there are conditions. Obviously your credit score has taken a hit since the filing and discharge of your bankruptcy, but your credit will still have an impact on your ability to finance a car. Every condition is different because every credit report and personal situation is different. You might think it is a car dealer scam, but it’s legal.

For example, if you have a good job and your credit report shows fair credit in the past, but problems in the recent past up until the bankruptcy there is a very good chance you can finance and buy a car. However if your credit report shows nothing but derogatory information your chance of finding a lender are reduced greatly. I didn’t same impossible, I said reduced. Buying a car after bankruptcy has many variables that need to be considered before a lender will say you are approved. You may also consider Buy Here Pay Here car dealerships if you have been turned down by traditional auto dealers.

There are many lenders that specialize in the financing of car buyers after bankruptcy and these are usually called secondary lenders. These lenders are willing to take the risk on people that are buying a car after bankruptcy, but they expect to get paid for that risk. To start with they will charge a very high interest rate that may be as high as 24% and secondly they also charge a fee either to the buyer or the car dealership for processing the paperwork and other overhead expenses. This could be as much as a couple thousand dollars depending on your credit, the car being financed and your personal situation.

Now besides the rate and the fee they will also require certain stipulations. These requirements may include proof of employment, pay check stubs, copies of current utility bills, bankruptcy discharge paperwork and other possible documentation. Wait there is more. You will be required to have a down payment on the vehicle you are buying that could be anywhere from $1500 or more which will depend on your situation and the vehicle being financed. I told you buying a car after bankruptcy is possible, but I didn’t say it would be easy.

I wish I could give you a solid yes or no when it comes to buying a car after bankruptcy, but as you can see there are many different factors that come into play. If the hoops you need to jump through to buy a vehicle after a personal bankruptcy are more than you want to endure the other than the cash car your last option is a Buy Here Pay Here car dealer.  If you are ready to take the next step for buying a car after bankruptcy you can click here and get approved first  by one of a very large source of specialty lenders that can give you the definitive answer.

If you are thinking about that cash car you can use our Used Car Buying Checklist

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One of things you should know about a car buying loan that comes from the car dealer is that when you finance a car at the car dealership the financing is simply a product that the car dealer sells to you so they can make money. That’s right, the car dealership is merely an agent or middle man that sells you a car dealer loan. You know what happens when you have a middle man, they want to get paid. So when you buy a car with a car dealer loan it’s not really a car dealership loan, but another item that they sell. This product is provided by the actual auto loan lender.

A Brief Car Buying Loan History

Many years ago when cars were not so plentiful as they are today the car dealers and the manufacturers realized that they need to provide car buying loans if they were going to sell more cars. Early on they would make arrangements with banks to provide financing and then in the later years the car makers set up their own lending institutions to make car dealer loans for their buyers.

Back to today, we now have many different lenders that will provide you with a car buying loan. Most of them are banks, credit unions or lenders that are owned by the car manufacturers. The car dealer will make arrangements with many different lenders to finance the cars they sell and then they place or sell the car dealer loan to one of these lenders. They will choose a lender to sell the “Paper” or your car financing loan contract based on several different factors. First and foremost is the amount the car dealer gets paid to sell you an auto loan. Secondly they select a lender that will accept your contract (car finance agreement) based on your credit. With all things being equal, they naturally select the lender that is the most lenient and pays them the most for being the middle man.

Low Rate Financing and Car Buying Loans

You might wonder about those specials on new cars that you hear about that have 0% financing or very low interest rates. This type of car buy loan is financed by the car maker’s lending division and is supplemented by the manufacturer. For example; when an auto maker has a car dealer financing special that has 0% car dealer loans they also have a rebate for the car buyer that does not use the financing. If they advertise a 0% for 60 months special then they also have a $1000 instant rebate. The $1000 is roughly the amount that it would cost the lender to provide you with a car buying loan versus a standard rate loan, providing you have good credit.

Which is the Best Loan for Buying a Car?

There are many variables that come into play when you ask that question. Everyone is different and has different financial situations. So the best auto buying loan is the one that works for you and needs your needs. Before I buy a car I always go to ….Click Here NOW!... and get a quote before I go to the car dealer and get a car buying loan. That way I always have several lenders competing for my business, which always provides me with a selection of different loans and then I can pick the best one for me. I can then compare those to any car dealer loan that they may offer. If I don’t choose a loan from the dealer I then get to deduct the rebate (when applicable) and avoid the extra expense that the middle man gets paid. Check it out and get the best car buy loan by Clicking Here! Bad credit can buy a car too get approved and save time.

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The Need For The Buy Here Pay Here Car Lot

The Buy Here Pay Here Car Lot Solution

If you are one of these people, don’t think you are alone. In fact it is estimated that over 100 million Americans have bad credit. Now that is a lot of people, almost 1/3 of the public. Even more amazing is the fact that these people that have bad credit are almost half of the car buying population. You can see buy those numbers that there really is a need for the buy here pay here car lot.

Buy Here Pay Here Car Lot May Be The Answer

So where does someone affected by severely damaged credit turn when they need a vehicle? After all it’s difficult enough trying to repair bad credit. Then throw in the fact that you can’t get a reliable car to get to work. This makes for a pretty frustrating predicament. One viable option is to go to car dealerships that have in house financing or in other words buy here pay here car lots. You need to do your research and be careful of any car dealer scams, but that goes for anywhere you buy a car.

Advantages to Buy Here Pay Here Car Lots

One of the major differences between a Buy Here Pay Here car lot and a traditional car dealer is that the car lot is both the lender and the car dealer. Most car dealers use outside sources as lenders which can make the process more difficult and time consuming. The main advantage is that when you go to the buy here pay here car lot you can buy and finance a car rather quickly in most cases. However the most important thing is being able to get a car.

In most cases the the buy here pay here car lot structures payments either weekly or every other week  depending on when you get paid. So another advantage is making much smaller payments, but there are more of them. This will keep you from having to come up with a larger payment once a month and for some it is easier to manage.

When there advantages there are always disadvantages and one disadvantage is paying higher interest rates. Until you credit improves and your credit score rises you will have to pay higher interest rates for anything that you would finance. The buy here pay here car lot will charge a high rate, but it is something you have to deal with if you need a car and can’t afford to pay for it in full. The main idea is to help you out with a car loan while you start building you credit to the point that you can qualify for traditional auto loans and dealership financing.

If you need to buy a car and you have poor credit the Buy Here Pay Here car lot is probably the best choice, unless you have a friend or relative that will lend you the money. Although you can buy and finance a car with poor credit if you talk to the right people. Get approved first before talking to the dealer.

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It wasn’t too many years ago when you applied for an auto loan you were either approved or turned down. Your credit score determined a pass or fail with no in between. If you were approved you got the current interest rate for your auto loan whether you had great credit or good credit. Today things have changed quite a bit when it comes to applying for and getting approved for an auto loan.

Credit Score Basics

To bring you up to speed on the basics of credit score or credit rating the first thing to understand is that anyone that has financed something has a credit score also know as a FICO score. Financial institutions that lend money to consumers report to one or all of the three major credit bureaus on the monthly status of your open loans along with past loans, late payments, defaults and any credit collections, bankruptcy filings or liens. These credit bureaus using a numerical rating system that ranges from 300 for lowest credit rating and 850 for the highest. Your credit activity gets numbers assigned to all the different transactions which are compiled to make up your credit score or rating. If you never had any credit experience you will not have a credit score. In the car financing business you are known as a ghost. If this is the case you may need a co-singer or perhaps you can qualify for one the auto makers first time buyer programs.

Auto Financing and the Impact of Credit Score

Most new and used cars that are sold today are financed by auto loans. Most of these auto loans are provided by banks, credit unions and automobile manufacturers. These sources for auto financing normally require a credit score above 700 for the best interest rates and terms. Having a credit score below 700 will not keep you from being approved for car financing, but it will have an impact on your interest rate and repayment term.

Credit and Car Financing Basics

The financial institutions that make auto loans use a tier system to determine your eligibility and interest rate for auto financing. For example; I mentioned earlier that a credit score of 700 will give you the best interest rate. If your credit score was a 675 you may have to pay a higher interest rate on your car loan that may be a couple of points higher than the car buyer with a 700 FICO score. Then a FICO score of 650 may be a few more points high and so on. I have seen car buyers pay interest rates as high as 24.9% on their car loan because they had a low credit score. This use of credit tiers by auto manufacturers lending divisions has often been abused by car dealership financing scams.

The difference between a lower credit score and the highest credit score could be as much as a couple hundred dollars a month in your car payment. Your FICO score can also dictate the amount of down payment you will be required to have on your car purchase. The tiers that determine your interest rate will also determine your down payment. The car buyer that has a 700 FICO score or higher may not need any down payment and the person with a very low score may be required to put down as much as half of the car financed. So you can see how important it is to have a high credit score when you are financing a car.

To avoid car dealership financing scams it is important for you to know your credit score. I personally use credit score monitoring service that is very inexpensive that notifies me whenever my credit is ran along with any changes that will affect my credit score. I was actually able to stop my identity from being stolen when I was notified that my credit was run by a cellular phone company. I was notified and was able to freeze my credit so the identity thief was unable to open any more accounts. I filed a police report and one piece of paper and the crisis was averted. Check Them Out Now! I wouldn’t be without the service. I can check my credit at any time and keep track if I am trying to improve my credit score.

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