The secret to getting fairly priced automobile financing is to have as much knowledge as possible. Astute car buyers will know their credit, know prevailing rates and know what lenders’ standards are. When one is armed with that much information, it tends to protect them from bad deals.
Before embarking on an automobile purchase, it is imperative to check one’s own credit score. A three bureau report with FICO scores can be easily obtained for very little money. The knowledge will be useful to help project what a fair rate will be. Unfortunately, though, FICO scores do not tell the whole story. Although car loans are priced based on an individual’s FICO score, there is a special FICO score for the auto industry which is not publicly available which weights automobile debt especially heavy. In the absence of the actual score, one can make the following assumptions: if one’s automobile debt has been handled better than the rest of one’s debt, the auto FICO score will be higher than the regular FICO score, if worse, it will be lower.
Armed with the knowledge of one’s scores, it is a good idea to get a pre-approved loan. This loan will not only provide the option of not needing dealer financing, but it will also give the borrower extra negotiating leverage. It also confirms what rates are actually available in the market. Borrowers should also do some internet research to find out what, if any, promotional financing offers are available, as well.
Finally, when sitting down with the finance manager, one should ask to see the “tier chart” for a given lender. That chart will indicate what types of rates to expect. If the borrower already knows their FICO score, they will know what rate to expect. If the finance manager quotes a lower rate and higher FICO score, it likely indicates that a superior Auto FICO score is being used. If a higher rate and lower FICO, the borrower should be prepared to substantiate their FICO score with a printed copy of the three bureau reports.
After getting the dealership’s quote, one can then compare it to the pre-approved offer in hand. If the quoted financing is superior, then accept it. If not, upon showing a pre-approved offer to the finance manager, they may be able to miraculously come up with better terms. If they will not move, one can simply use the pre-approved financing to purchase the car.
An automobile is a major purchase, and the cost of financing can be huge. With this in mind, it is only reasonable to expect that the best prepared people will achieve the best results.