Car Payments

Why people fail to get good deals - Everyone obviously wants to get the best possible loan rate and the lowest car payments. Yet, many people fail to do so.

But why don’t they? Because they failed to separate car shopping from loan shopping. They started out shopping for a car and left their financing for the dealer to handle.

According to NADA (National Association of Automobile Dealers), two out of three people (67%) arranged financing through the dealer.

Dealer Financing
Car dealers love to distract you with talk of low monthly payments. They know that car buying is an emotional process.

You’ll hear these time tested pitches:

• What monthly payment are you looking for?
• What if I told you that you can drive it home today with no money down?
• If you finance through us, I can get your payments down to where you want them.
• If you finance through us, I can give you a lower price on the car.
• If you finance through us, I can get you a better price on your trade-in.

Unfortunately, dealer financing is not the best deal;, nor does it provide you with the lowest car payments.

The best loan is one with:

• The lowest interest rate
• The fewest (and lowest) fees
• The easiest application process
• The fastest decision time
• The quickest check cutting

The best loan sources for just about everyone are as follows:

#1 - Online lender
#2 - Credit union
#3 - Local bank
#4 - National bank
#5 - Manufacturer financing - GMAC, Ford Motor Credit, etc.
#6 - Anybody but the car dealer!

Here’s why online loans are ranked #1:

• No lender or application fees
• No commissions involved
• Apply in 5 minutes
• Get answer in 15 minutes
• Have check tomorrow
• Act as clearinghouse for best loans
• Immediately get the lowest rate you qualify for (no games)
• No paperwork hassles (signing the check completes the loan)
• Usually 1%-2% below banks and credit unions

Here’s why credit unions are ranked #2:

• Great deals for members only
• Will negotiate for your business if you’re a member
• Very competitive rates (within 1% of online quote)
• Drawback - sometimes difficult to join
• Drawback 2 - usually don’t have ½% online payment discount

Here’s why local banks are ranked #3:

• Competitive rates (within 1.5% of online quote)
• Friendly local staff usually knows you
• Will negotiate IF you have a verifiable written quote
• Drawback - everyone knows your credit score
• Drawback 2 - Negotiating rates involves manager approval

Here’s why national banks are ranked #4:

• Very competitive rates for those with prime credit
• Sometimes fight for market share with promo rates
• Will sometimes negotiate based on verifiable quote
• Drawback - often takes a day or two to get approved
• Drawback 2 - rates aren’t great for lower credit scores

Here’s why manufacturer financing is ranked #5:

• Very attractive promo rates on certain models
• Need top tier credit to qualify for 0% deals (750+)
• Drawback - it’s ALWAYS cheaper to take cash back than 0%
• Drawback 2 - have to negotiate with car dealer finance dept.

Here’s why car dealer financing is ranked last:

• Dealer ALWAYS adds a markup onto your loan
• Dealer adds a $300+ financing fee to the loan
• Dealer can make “mistake” on paperwork increasing total
• Dealer is always a middleman, not a source
• Have to deal with their LIEnance department

Best online loan sources
There are several extremely competitive online loan sources. The best and easiest to do business with are:

E-Loan - Biggest online lender for all types of loans

Capital One - Volume leader in online auto loans

Road Loans - Specializes in just automotive loans

HSBC Auto - Great site for new or used car loans

Car Loans - Car site that also arranges auto loans

MyAutoLoan - Nice boutique loan site

Lending Tree - Has tremendous sourcing power

Virtual Bank - Has the lowest published online rates!

Get quotes from at least three of these lenders

• Your rate quotes will vary slightly (and ¼% on $20k = $50).
• All have short, simple applications.
• You don’t have to submit any extra paperwork like W-2s.
• All have a 15-minute approval process.
• All knock an extra ½% off your rate if pay electronically.

It only takes about five minutes per site to plug in your information. You’ll have three great online loan quotes in hand in less than 20 minutes!