A. People ask me this question all the time. There is no right or wrong answer here just options. The one that
suits you best is what you should do. I will point out some of the pro and cons of the three different ways to buy.
Paying with cash:
I talked a little about this in the cash buyer section. Paying hard cold cash for vehicle isn't always the
right way to go. If you are just buying a cheap car maybe 3000.00 or 4,000.00 by all means go a head. The first thing to take
into consideration is the manufactures incentives. There are lots of models today being sold at 0% interest rate. If that
is the case take advantage of it. Keep your money in the bank an earn interst in stead of paying for the car with cash. some
manufactures have either rebate or low APR if the rebate is high then obviously take advantage of it. But check out your own
bank or credit union they may have a great deal on rates as well it is very competive right now. If you can get the rebates
at the dealer and a 3.9 or 4.9 rate from your own bank then you need to look pretty hard at that option. a lot will depend
on how much the vehicle is. I myself would rather hold on to my cash in case of an emergency. Just make sure you check out
all of your option before paying cash.
Financing:
For most of us this is the only option we have. Just like every thing else in the deal you need negotiate
your rate as well. If the manufacture isn't offering any specials then check out your own bank or credit unions. Know what
they can do before you start the whole process. If your bank can do 5.9 and your working your deal out tell them what you
have if they can beat it great if not nothing lost. I would make them beat it buy at least a half of point or better. Don't
let them come back and say yea we can beat it will do 5.8%. Like ever other part of the deal you have to make sure you are
getting the best deal possible. Tell then in order for you to do there they need to beat it at least a half a point. Even
if you didn't check out your own bank you can still use this tactic as a bluff.
Know your credit score"period". If you know your score you are less apt to get burnt by the
business office by charging an unusually high rate. I have seen people with a score over 700 walk away paying 15% Apr because
they didn't know what there score was. I remember one person who even though they had good credit and where over 700. They
thought their credit was bad, and told there sales person. I don't think I need to tell you what happened to them.The score
you need to buy a car varies from area to area. Generally a 640 or better score will get you approved but with a higher rate.
Most banks look at 700 to be the breaking point. Anything over 700 is usually preferred credit and get the best rates. Some
banks may go higher but the rate maybe lower to. For instance the score regular rate is 6% if you have a 700 but if you are
a 740 they maybe able to take a half point off that. Like I said this will vary form state to state. You can get a free copy
of your credit report once a year through https://www.annualcreditreport.comor by calling 1-877-322-8228. This website will allow you to get one report each year for free. You don't have to join anything
like the other sites. This site is sponsored buy the credit reporting companies. You should check your credit report at least
once a year. If there is a problem it can sometimes be quite a hassle to fix.
The manufactures usually have there own financing source. For example Ford uses Ford motor credit and
so on. These lenders tend they tend to be a little more relaxed about your credit than perhaps a local lender.You can also
go on there web sites and get pre-approved. Thou I caution you on this if you have credit issues let the dealership work it
out for you. They will have more influence with the credit buyer. Bad credit is still bad credit, but if you are marginal
the manufactures program maybe the best way to go. I'll talk about what you can do if you have chalenged credit (450 to 599
score) see the SECONDARY CREDIT page. If you wish to seek your own funding you should check out www.capitalone.com. They are a pretty competitive company. I lost a lot of back end business because of them. I do believe they offer the gap
insurance as well.
Credit Cards
There is a big misconception about buying a car on a credit card. First of all not all dealers will let you do that.
Most dealers today either put a cap on the amount or don't even except credit cards anymore. There are a couple of reasons
behind this.
1. When ever a merchant excepts a credit card for payment they to have to pay a fee to the card company. This fee can
be any where from .50% to 2or 3 % so if you buy a car for 15000.00 and put it on a credit card the dealer would have to pay
as much as 450.00. Thats money that comes out of the gross profit. So if they do let you pay with a credit card I have to
assume they made a pretty good lick on me.I'm walking out at that point.
2. When you use a credit card you have 30 days to dispute any payments. Well if you start having problems with the
car you could fight it with the credit card company and back out of the deal or at least delay ther payment and cause problems
for the dealer. Some of the dealers I have worked with will make you go to your bank and get a check loan on your credit card.
What a lot of people don't understand is that you can't used borrowed money to recieve borrowed money. Other words you are
not suppose to use a credit card as a down payment on a automobile loan. All thou this is over looked in most areas to the
best of my knownelge it is an illegal transaction. If you look at your purchase order where it says cash down. You don't see
a place for a credit card number only cash.
3. This is just my personnel note here but anyone who buys car on a credit card is nuts. Unless you have the cash to
pay it off and are just trying to get the extra points or it is a gauranted low rate for 60 months or better. Either way you
need to find out a head of time if the dealer will except a credit card for payment. You can call the dealer and ask to speak
with the business manager this is the one person in the dealership you can trust to get a straight answer on this question.
