Web Wealth: Before you buy a car, check websites on financing
Cars have been selling well in the economic recovery. And if you find yourself in the market for new wheels, it'll be good to review the rules of the road for financing the purchase of a new or used vehicle.
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Cars have been selling well in the economic recovery. And if you find yourself in the market for new wheels, it'll be good to review the rules of the road for financing the purchase of a new or used vehicle.
The car site Edmunds.com has a section devoted to auto financing. A current featured article there describes the dangers of "yo-yo financing." That's when you drive off with the car, but the dealer calls later to say your financing fell through and you need to come sign for a more expensive loan, or make a bigger down payment, or both. The best defense is not to take possession of a car before the deal is sealed, and to read the small print for conditional terms.
The "confessions" of an auto-finance manager are part of an older series of postings on Edmunds.com, but are full of lessons for car buyers who, according to the author, typically are woefully naive about the tricks dealers have up their sleeves to boost fees and financing costs.
Consumer information from the Federal Trade Commission can help you with basics, including the car-lot lingo on extended-service contracts and other add-ons. There are significant differences, beyond the monthly costs, between buying and leasing a car, and the more you know, the less likely you'll be to misunderstand the terms of each sort of transaction. The FTC stresses knowing your financial limits before you go car-shopping and the need to stick with the price ceiling that you've set for yourself beforehand.
"How car financing works" is the title of this feature at HowStuffWorks. One of its first points is to say that if you can pay cash for a car, it's probably best to do so - unless your money is invested at a higher rate of interest than you'd be paying on a loan. The article goes into some detail, even discussing the merits and pitfalls of borrowing from a family member or friend.
Should you get a new or used car? Bankrate.com has a simple "calculator" for that. It asks, first, about your view on vehicle depreciation. If your answer is that you want to minimize your losses in that area, you are a used-car person. Otherwise, the new-or-used choice may boil down to what you can afford. And on that score, several car sites note in recent months that with discounts and financing incentives, it can be cheaper to buy a new car than a used version of the same model.
Zero percent financing sounds like the car buyer's holy grail. But be careful, says this older post by Gary Hoffman at AOL Autos. Many car buyers won't have the credit raging to qualify for those low-low-interest loans, and by the time they find out, it can be psychologically difficult to back away from the table.
at 215-854-5114, rkanaley@phillynews.com