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Where can we get the best deal on financing a car? A credit union? Or should I stick to a car dealership?

My wife and I are looking to purchase a car. I recently moved here, so basically I have no credit. My wife's credit is ok but not great. We are looking to buy a used car but we are not sure as to how to go about it, whether it be through a credit union or through the car dealership. The price range we are looking at is around $9,500.00 with about $1,500.00 down. What is the best option for us and in your opinion, and what is the best interest rate do you think we can get.

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Bills.com | Find Learn Save

Numbers. The answer to your question is found in the numbers.

Rate Shopping

A good rate on a vehicle is 8-10%. People with no or poor credit history will pay twice that. Generally speaking, a consumer will find the lowest loan rates at credit unions and the highest rates at dealers. On the other hand, credit unions have a reputation for being careful lenders, whereas some car dealers (known as "buy here pay here" dealers) will finance anyone regardless of their credit history. Like all generalizations there are exceptions.

Visit your local credit union and apply for a loan. See what rate the credit union offers. Visit your local bank and do the same thing. The difficulty will be rate shopping at car dealers. Car dealers are not set up to help consumers compare loan costs. Indeed, a car dealer's first priority is to get you into a car, help you fall in love with the car, and once hooked introduce you to the loan officer. Unfortunately, even if the loan officer offers an attractive loan rate, the contract you sign may have an escape clause that allows the dealer and its finance company to rescind the deal. See the Bills.com resource to learn more about the bait-and-switch schemes some dealers employ with auto financing.

Vehicle Shopping

When you find a vehicle you like, learn the retail cost of the vehicle. You can find the this at the Kelly Blue Book Web site. You should also find out whether the used vehicle you are interested in purchasing has been involved in a major accident, suffered flood damage, or been declared a lemon under your state's Lemon Law. You can obtain all of this information by purchasing a $25 used vehicle history report from Carfax. I recommend Carfax, as it is important to know the history of the vehicle you plan to buy. Many dealerships will provide a free Carfax report and Blue Book pricing information if you express interest in purchasing one of their used vehicles. If a dealership is unable or unwilling to provide you with Blue Book and Carfax information, write down the make, model, mileage, and VIN number of the vehicle and use that information to obtain vehicle value and history information by visiting the Carfax Web site.

I wish you the best of luck in finding an auto loan that fits your needs. To learn more about purchasing a vehicle, I invite you to visit the Bills.com page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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1 Comments

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  • 35x35
    Jul, 2010
    rowanat01
    I agree with you. A good rate on a vehicle is 8-10%. People with no or poor credit history will pay twice that. Generally speaking, a consumer will find the lowest loan rates at credit unions and the highest rates at dealers. On the other hand, credit unions have a reputation for being careful lenders. =====================
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