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Know Before You Go: Preparing to Buy a Car

 

Purchasing a car can be a difficult river to navigate for many consumers.  Here are two things every consumer should do before they visit a car dealership. 1)      Check your credit score Many consumers don’t learn their credit scores before they start to negotiate a car purchase.  That is a mistake for two reasons. As many as 1 in 5 consumers have incorrect information on their credit reports.   If your credit score is low even though you think you have a pretty good credit history, it might be because you have inaccurate information on your report.  If you are aware of inaccuracies before you go to the dealership, then you can correct the errors and improve your score.  A better score should result in a better interest rate. The second reason why it is important to know your credit score before shopping is so that you can negotiate a better interest rate with the dealer.  Most consumers do not know that when a bank or finance company approves a loan application, they frequently permit a car dealership to “mark up” or increase the interest rate.  The car dealership makes more money by getting a “cut” of the increase, and the consumer pays for it by having to make higher payments!  Frequently, car dealers will tell a consumer that the interest rate is the best they can do because of the consumer’s credit.  That tactic is not going to work as well on consumers that know their credit score. 2)      Apply for an auto loan There are some  benefits to financing a car purchase at the dealership.  First, it is convenient.  Second, consumers have certain rights when they finance the car at the dealership that they may not have if they obtain a loan on their own.  But, since car dealers make more money by charging consumers higher interest rates, it is sometimes harder to get a low interest rate. The best way to get a competitive interest rate from a dealer is to get a quote from another lender. Before you go to the dealership, apply for an auto loan from your bank or credit union. (Many of these loans can be applied for online and you can get a decision in minutes!)  Bring the quote with you to the dealership.  If the dealer gives you a loan with a higher interest rate than the quote you obtained, show them the quote.  Many dealers will match or beat an interest rate in order to make the sale. Conclusion When it comes to buying a car, knowledge is power! Don’t rely on the dealership to guide you and inform you about your credit.  At the end of the day, their primary concern is to make a profitable sale.  The more you know about your creditworthiness, the more likely it is that you will get the best deal. For more information on obtaining a FREE copy of your credit report, click here.  For more information on improving your credit score, be sure to check out our FREE “Understanding Credit Reports” webinar on Monday, January 13th, 2014 at EST.  Sign up by emailing hgrice@consumerlawgroup.com.  

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