How to gain advantage on a car loan

Car buyers at present should exert efforts in order to obtain the best car loan for this year. This is because getting the best financing is not an easy task as it is during period of easy credit. In addition to this, most financial institutions are still experiencing the after-effects of the global financial crisis. Given this, it is still important to do your homework before dealing with car dealerships. You should bear in mind that even a 1% reduction from your current average car loan today could easily provide you with a $500 savings from the car purchase.

The best thing you could do still is to secure a pre-approved loan from a local bank or credit union before stepping on the dealership’s lot. Through this you would be able to determine if the dealership could beat or even match the offer of the pre-approved loan.

Although a pre-approved loan cannot always beat the financing incentives offered by dealers, this could provide you with the leverage in negotiating with dealers by providing a standard where the comparison would be made. A pre-approved loan provides you with a concrete basis for comparison and without this it is quite impossible for you to conclude whether the offer of a dealer is good or not.

Limited options

Due to the global economic meltdown, you need to remember that there are limited loan options as of the present compared to the number of options two years ago. This could mean that you might not be able use a lender’s offer against those offered by others as easy as it is on the past. Banks are still strict in providing loans creditors. However, the good thing is that there are many lenders who are willing to offer loans since the 2008 when the financial meltdown has started.

Unlike banks, credit unions remained strong in the midst of the economic slowdown. As a matter of fact, the credit unions’ share of the car loans had increased to 37 % in first part of 2009 from 24% a year before. The share still remained at higher levels as of the present. Banks on the other hand started to loosen up as the delinquencies in car loans soars down. This condition provided creditors with more choices.

Low rates on temporary basis

Despite the economic crisis, the normal interest rates remained low based on historic standards. This was due to the efforts of Federal Reserve to energize the economy. The current interest rate for purchasing a new car though a 5-year loan is around 4% or 5% percent. This makes car financing cheaper this year compared to the following year where there is an expected rise on the interest rates.

In addition to this, the economic hardships experienced by car makers resulted to the constant influx of higher incentives. This condition leads the consumers to choose between higher rebates and zero-percent or lower financing rates. Besides this, consumers are also confused whether to prioritize the offers from banks or those provided by dealerships. In case you are faced with this dilemma make sure to look upon the cost of ownership.

When confronted by this situation, all you need to do is to look for a vehicle with lowest price on the vehicle. The next thing you would do is deduct the rebate, and try to determine the payments involved based on the pre-approved loan that you already have. After doing this, you also need to calculate the payments involved in a zero-percent financing deal most especially the total selling price minus the rebate. As soon as you obtained the result of these two calculations, try to payments involved for each option and determine whether you need to purchase in cash and go-away with the pre-approved loan or obtain financing from the dealership in order to take advantage of the benefits of the zero-percent offer.

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