Shopping for an Automobile

Buying a car and a house are typically the two largest purchases an individual makes in a lifetime. Due to the major financial commitment, caution must be used.

Know the value of the automobile. Know the price of a used car and do not overestimate the value of a new car. Once a new car is driven off the lot, it becomes a used car and the value decreases dramatically. To obtain an estimated value of a used car or a potential purchase, you can use the services of Kelley Blue Book (http://www.kelleybluebook.com/). Kelly Blue Book and other websites give insight into the pricing of the automobile you are considering as well as any rebates, discounts, or special financing. A dealer is not responsible for sharing this information. Comparing prices with various dealers can save thousands of dollars. Know which dealerships will negotiate and which dealerships have set prices.

Whenever considering financing, explore the options. Two such options are bank financing and credit unions. To be an intelligent consumer, it is your responsibility to know the fees associated with all types of loans and terms of the financial plans. Between credit unions and bank financing, credit unions usually have more favorable terms for loans.

Another financing option would be dealer financing. If you are considering this, be aware the dealer will shop around various loan companies the same way you can. For best success in choosing a financing plan, do some research before hand. Loan rates vary according to the buyer's financial history, job status, and dealer's connections. Remember that because of the connections, an established dealer may provide better financing and may be more likely to provide car guarantees than smaller dealerships.

Caution:

1. Be aware that dealers may encourage you to sign off on the purchase before final loan approval, then come back with less favorable terms. Wait for final approval before taking delivery of the vehicle.
2. Be aware that when a dealer requests your ID, they will be making an inquiry on your credit report. That's fine if you are serious about buying and financing through the dealership, but don't let the dealer run unnecessary inquiries.

If you have a history of credit problems, you may want to obtain a copy of your credit report. Three primary sources for this information are Equifax, Experian, and Trans Union. If you have been denied credit, you may request a free report within 30 days.

Find the monthly rates for your car loan. These monthly rates are calculated using various interest rates and the number of years for the loan. Websites provide auto loan calculators to figure the monthly payments. Loans generally last for two, three, four, or five years. The more time it takes to repay the loan, the more interest you will have to pay. A longer life for a loan may double the interest you have to pay on a loan.

Remember to consider down payments when purchasing a vehicle. Down payments typically range from 10 to 20 percent of the value of the automobile.

An often overlooked expense when purchasing an automobile is insurance premiums. Insurance premiums are especially important for young people who will be carrying collision insurance. This extra expense of owning a vehicle may dictate the type of automobile can reasonably afford.

When purchasing a new or used car, the operational reliability needs to be examined. Check the history of the automobile online by using the VIN (vehicle identification number) to access its records. If the vehicle has been involved in an accident, flood, hailstorm, or recall, this information should be available. Have the vehicle examined by a reliable mechanic. Neutral dealerships will perform a 21 point inspection check. Know the safety ratings and performance ratings to be sure the automobile will serve you well.

When considering leasing a vehicle, be aware of all the terms. Lack of equity, limited mileage over the period of leasing, and being locked into a vehicle for an extended period of time are factors to consider. Also be aware of the different leasing plans and do the math before signing the lease to know which plan is most appropriate. A lease to buy plan may be the best deal, but circumstances sometimes change.

Always read all forms you sign. Ask questions about any information that is unclear.