Automobile in particular can be purchased either through cash or through finance. But those who are short of cash have to depend on capital car financing institutions. Many start off bravely but somewhere en route make mistakes thereby losing quite a lot of money.
The first blunder they make is of accepting terms proposed by the dealer. Many a time lending institutions offer buy down rates to the dealer which remains undisclosed to the customer. When a person signs at 7.25% for it is considered to be the best rate on your credit rate, you may be leaving one or two percent behind on the table. It is important to negotiate and of course do some research as it will help to save money although the dealer may not agree to surrender his entire buy down rate.
Be aware of your credit score and outstandings against your income as well, before the lenders willing provide you the loan amount. Prior to considering lending institutions, consider the bank that you are dealing with as many cater to existing customers for loyalty reasons, especially if the relationship has been a long-term one. Special finances are offered by some employers on automobiles for fringe benefit. Research diligently before accepting these as the best rates. Military and government officials are offered special financing which beats all rates that are currently offered. For details these members must get in touch with their finance office.
Be prepared for making marginal down payments, as a majority of the lending institutions finance only a part of the purchase price. That is if the car cost $20,000 you will be offered a loan of 80-90% of the car value. The purchaser will have to make arrangements for $2000 for down payment and over that will have to pay for tags, fees and taxes separately.
A buyer having marginal credit must also understand that finance managers generally quote rates which they think is suitable, much depends on how good his relation with the lender is.
Finally, the rate of interest is directly proportionate to the loan term. In case of a short term loan of 24 months you may be levied an interest rate of 5.9% and a loan of 60 months may have 7.5% interest rate. Car finance currently is available at simple interest rates, therefore it would be sensible to opt for a long term loan even if it is at a higher rate of interest.