New Car Buyers Using Personal Loans
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Buying a new car
When it comes to buying a new car, most consumers look to personal loans for financing. It is a great time to start looking because of the recession. Car lots are full and dealerships are trying to get rid of inventories with deep discounts and out-of-the-norm specials. If you are in the market for a new car, do some research and leg work before you go to a dealer. Here are some tips on how to handle the transaction.
Getting pre-approved
The best move when it comes to financing is to get pre-approved. Just like you would comparison shop for a new pair of pants, you should also do some searching for loan products. Not every loan is right for every person. The advantages of being pre-approved are that you’ll save time at the dealership, you most likely will find a better deal independently and you have more control over your loan’s terms. You can talk to the dealership’s finance department, but remember that they traditionally are more expensive. It’s best to take matters into your own hands when it comes to money.
Shop around
Anyone who has purchased a car knows that there are huge variations in loan products with lenders. A simple search can save you hundreds of dollars over the course of the loan. Remember to never sign anything without knowing the exact details of the interest rate, terms and loan lifespan. Once you do know the terms of various lenders you can compare them to see which one is the most beneficial. It’s also a good idea to check with dealerships and see if they have better deals there. It is not necessarily a bad idea to work with a dealership for financing, but it is a bad idea to make them your only option.
Another thing to remember when it comes to financing is that a loan company will offer you extras. Things like extra accident insurance, health insurance, and extra protection will all increase your cost, but their value is overrated. Stick to the basics and pass on the extras.
Lending from the dealership
Once you have some research from other sources for your personal loans, you can check with the dealership’s finance department. Many dealerships have strategic alliances with lenders and can get you the loan you need relatively easily. The dealership will do more to get you the loan because they have a vested interest in getting you the car. The worst case scenario is that you find a dealership trying to give you a loan out of your price range. If you did your research beforehand, you should have no problem taking your other loan options.
Lending from credit unions and banks
Both banks and credit unions offer nonnegotiable rates and normally they are lower than the dealership’s interest rate. In 1991 the IRS got rid of the income tax reduction for interest on personal loans, with the exception of home equity loans. It gives a tax deduction on principal up to $100,000. Banks know about the tax law and are offering “tax smart” loans that give customers a return on the car loan. The great thing about these loans is that they offer the normal qualities of a loan, but with the added tax deduction.
Buying the car
In the end, buying a car should be a great experience. The key is to do some legwork before hand, though, to make sure that all the details of financing and personal loans are taken care of. That way, when you walk into the dealership, you can confidently start looking for the car of your dreams, knowing you can afford it.
