Wednesday, October 6, 2010

Beware of the New Car Loan Financing Trap.

When you visit a new car dealer the entire experience is designed to make sure that you leave with a vehicle.

From the showroom to the shiny new cars to special offers and more… sales people wait for you to arrive so that they can make a sale. Only one problem, the most affordable new vehicles are domestic and range from $20,000 - $30,000 in price after tax and freight.

Let us be finance people for a moment and look at a number like $25,000. If we divide $25,000 by 60 payments (5 years) at 0% Interest you are looking a monthly payment of $420 per/month at NO interest. Now who would finance a customer at 0% interest. This is the subject of our article.

· Many new car makers advertise low APR financing but if you read the fine print you will learn that they will also demand large down payments and involve very short term loans (no longer than three years of financing).
· Those who offer 0% leases, tag large buyout at the end of the lease.

So what happens if you don’t want to lease and can’t afford extremely short term financing to qualify for the low APR rate?

The dealer still has financing options that they will try to sell you. For those who cant afford a large payment and don’t want to lease, well now the dealer can send the application out to banks and finance companies. Banks and finance companies will not finance you at 0% interest and most car loan rates start at 7%. The only way to achieve the lowest payment is to stretch out the loan term and new car dealers will try to sell you new car financing up to 84 months, which is financially irresponsible.

The best thing to do is take a deep breath, take your time and do lots of research. If you don’t know what kind of vehicle you want, visit some quality pre-owned vehicle dealers. They will have the inventory to allow you to test drive lots of different vehicles. Consider a low mileage pre-owned vehicle. This can reduce the cost of the vehicle by up to 40%. Dealerships like Prudent Value Cars carry lots of newer vehicles with less than 50,000 kms. "We offer financing that considers our client’s financial goals".

1 comment:

  1. I know that most of the finance companies provide loans through their website. But there are any option for church loans?