My friend Matt came by last week and showed off his new car. It was nice, a 2009 Honda Accord that was new to him, only about 25,000 miles. He was just waiting for the dealer to call and say the loan went through, but they were letting him drive it for now.
Matt's credit isn't great--his credit is bad, actually--but the salesman said not to worry.
A few days later, Matt came by again, not so happy. The salesman had called back. The loan hadn't been approved, but there was another loan, with a slightly higher interest rate... Matt needed to come into the dealership and sign some more papers.
Turned out the rate was almost twice as high and so were the monthly payments. Long story short, it was a mess. He had to give the car back, pay for the miles he'd driven, and start shopping for a car all over again.
I was sympathetic when he came by to tell me. But after he calms down, I'm going to suggest the same thing that I'm posting here. If you're shopping for a car, read up a little about car shopping and vehicle financing, and then get a loan first. It works for either new or used cars.
No, I don't own a car, but that's how I'd do it if I was going to buy one. I tagged along car-shopping with a woman I work with last month, and it's what she did. She explained how, and it turned out very slick.
You apply for and get approved for an auto loan online, before you ever set foot on a dealer's lot. Even if you have bad credit, auto loans are out there for you. If you have good credit, auto loans are even easier to find, but it still makes sense to shop around for the best.
When you walk into the dealership with a loan already approved, you know how much you can afford to pay. You can negotiate the deal based on the car itself, without listening to a bunch of crap about your credit score and how they'll do you a favor, blah blah blah.
Bad Credit Auto Loans Online
Here's how it works. Search online for bad credit auto loans, or just auto loans if your credit is good, and you'll see lots of companies competing for your business. What they want to do is shop around for you. Some shop around at car dealerships, while others shop around at banks. Either way, they'll find you one or more loan offers, so you can compare and choose the best. The websites walk you through the steps easily.
You'll generally need a steady income of around $1500 a month, plus the usual stuff: phone, proof of residence, ID. If you've come out of bankruptcy, that's probably okay, though you'll pay a higher interest rate (big surprise). Even if you're currently in bankruptcy, if you have an "authorization to incur debt" you can probably get approved.
The online auto-loan places that talk to banks obviously give you a little more freedom. With an approved loan in hand, you can go to any auto dealer you want. The ones who shop at different dealerships limit you to getting a car from that dealer, but you've still got your loan out of the way and you know it's probably the best one you can find from a dealer in your area.
Like with any loan, the better your credit, the lower your interest rate will be, so get your credit in as good a shape as possible before doing this, and scrape up as large a down payment as you're able. Watch out for scams. Only send all your personal information over a secure website to a company you trust, after you understand what they'll do with it. Is it going to banks or local car dealers? Or are they sending it to some guy in Nigeria? A little common sense will help you decide when it's safe to proceed.
But honestly, it's pretty cool to be able to go through the loan hassle online, get that out of the way, and then walk into a dealership ready to buy. The woman at work took me along as a token guy when she went car shopping, even though she knows more about cars than I do. But you know how dealers treat women sometimes, so I was supposed to look at the engines and kick the tires and act wise, while she did the talking. It was impressive to listen to her deal without needing to grovel for a loan.
If Matt had done the same thing, he wouldn't be in the jam he's in. Not that I'm going to tell him that right now. He doesn't read this blog and I'm not going to say a word until he's in a good mood, because the last thing he wants to hear is helpful advice. But once he settles down, I'll suggest it, and he's going to thank me.
10:15 p.m. January 25
Is this like for used cars or new cars or what?
10:41 p.m..January 25
Either one. Cool avatar, btw.
10:58 p.m. January 25
thanx. Do you have to pay to apply for the loan?
11:23 p.m. January 25
Nope, you shouldn't.
10:21 p.m. January 30
so wut happened with matt
7:32 a.m. February 1
2009 VW Jetta. Got a few more miles on it, but $3,000 cheaper. He's happy. And I have somebody else to bum rides from. Woohoo!
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