Take the stress out of auto loans by doing your research & making a plan
, by Tom Quinn
Buying a new car can be a stressful endeavor. There are a lot of options to consider and expenses to weigh. You might be wondering
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New or used?
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Economy or luxury?
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Electric, hybrid or gas guzzler?
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Model, color, moon roof ... and dozens of other features you have to think through
But you have done your research, persevered and have narrowed down your preferred option. The work is done and you have visions of driving off the car lot. Not so fast .
Have you figured out how you are going to pay for the car? While cash may be the easiest, writing out a check for $25,000 or whatever amount is unfortunately not an option for most of us.
So that means you're going to have to finance your purchase, which surfaces up a bunch of other questions. Do I lease or buy? How much of a down payment should I make? What about the value of my trade in? Do I use the dealership's finance offerings or go with my bank or credit union? How can I feel confident I am getting a good rate?
The answer is going to be unique for each one of us based on each of our unique circumstances and preferences. The good news is there are a lot of resources out there that have insightful information that can help guide you through the process.
The Consumer Financial Protection Bureau (CFPB) recently published a comprehensive collection of resources called "Take Control of Your Auto Loan" designed to help people navigate through the process of getting a car loan. Resources included:
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A web site containing information and tips on planning to shop for an auto loan, learning to explore loan choices, knowing what is negotiable, and understanding how to close the deal.
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An auto loan worksheet to help you compare loan offers, see the total cost, and negotiate the best deal on an auto loan.
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A step-by-step printable guide to help you navigate the auto financing process, including budgeting considerations, understanding the auto finance process, shopping for an auto loan, negotiating and closing the deal. The guide also emphasizes how to avoid common pitfalls.
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Database of questions and answers from people about auto budgeting and financing.
The collection is a great way to dive into all the details and nuances in auto lending. Of course, myFICO also has a lot of insightful information about automobile financing as FICO® Scores typically play an important role in whether you are approved for the financing and at what interest rate. As part of your planning and research steps, access your credit reports and FICO Scores to see where your credit stands now, identify and address any potential data reporting issues and create a plan before you apply for the loan.
Focus on the FICO® Score versions most commonly used in auto lending decisions which you can access in any of the myFICO products. Industry-specific FICO Score versions are FICO Scores that have been fine-tuned for auto loan risk, and the majority of auto loan decisions using a FICO Score are based on these fine-tuned scores.
In addition to accessing your FICO Scores, visit the myFICO Forums where everyday people post questions, responses and thoughts about credit scores, credit bureaus the lending process and more. Got a specific question? Chances are others do as well and the FICO Forum Community is a great resource to get insights into what's on your mind. It's free and open to all.
While the car buying process can seem overwhelming, it doesn't have to be.
Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.