BHPHAutoDealers – Bad Credit Car Loans – Getting a Better Interest Rate by Jenny Bunn

BHPHAutoDealers - Bad Credit Car Loans - Getting a Better Interest Rate   by Jenny Bunn

Jenny Bunn, Contributing Editor

Whether you are securing financing on your own, the dealership is handling it for you, it is important to explore all of your options. Even if your current vehicle is ready to fall apart and you have been waiting a couple of days to hear the salesperson call and tell you to pick up your car, you need to slow down.

It is those with bad credit who get taken advantage of when it comes to financing. You likely already know you are going to get nailed with some ridiculously high interest rate but do you know how much that rate gets increased in the finance office at the dealership?

The back of the house typically makes the most money on a car sale, especially with people who have bad credit. If the lender is already charging you an 18 percent interest rate and the finance manager marks it up to 19.75 percent, are you really going to complain? Will you even know? Stop coming across so desperate and let them know you expect them to find you a better rate. There are enough alternative financing options today that you don’t have to settle for the first one you are offered. Yes, the finance department should make a profit for their hard work, but they should not be paying their hefty car payment off the commission from your deal.

You may find that you don’t even need alternative financing. There are some things that will work for some people to get bought by a traditional lender. You will still have a high rate but not nearly as high as you would with alternative options.

Get a Co-signer

A strong co-signer can get you approved in the blink of an eye, and at a much better rate at a bhph auto dealer. Wouldn’t it be nice to have a lower car payment? Of course, you probably feel awkward asking for help but you may be surprised at those who are willing to put their faith in you, especially if they know you are a hard-worker.

This will allow you to build your credit with a reputable bank while saving money on your car payment. Hopefully, a year from now, you can refinance the car solely in your name since you have proven your credit worthiness to that lender.

Put More Money Down

The more you put down, the more invested you look in the vehicle. The more you have invested, the less risk there is of you defaulting on the loan. Sometimes if you even go back to the lender with a few hundred dollars, just to prove how hard you are trying, it could earn you a small decrease in the interest rate.

Don’t be afraid to hit the used car manager up for a little more for your trade too. He may not have a lot of room to budge but $100 more for your trade and $100 more out of your pocket might make a significant difference. If the dealer thinks they are going to lose a sale over a small amount, you may be surprised at what a sweeter deal they offer you, especially at the end of the month when they are trying to make their quota.

It is also important to note that dealerships have a lot more leeway with the cost of used cars than they do new ones. While you may assume that there is a tremendous amount of markup on new vehicles, there’s really not. If a salesperson tells you they’re at invoice, there is a good chance that they are. Used cars is where a dealership makes all of their money and it’s typically where you are going to want to shop if you are going to need to do some negotiating for the best interest rate.

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BHPHAutoDealers – Important Questions for the Finance Manager by Jenny Bunn

BHPHAutoDealers - Important Questions for the Finance Manager   by Jenny Bunn

Jenny Bunn, Contributing Editor

You will likely find that the finance manager at any dealership is quite a busy person. They may come off grouchy at the end of the day, but if you spent your day convincing banks to buy deals while being stalked by a team of salespeople nonstop, you may find yourself on edge too. Don’t pity them too much, they are well compensated.

You will also find that they talk quickly and go over paperwork fast. Sometimes, this is because they are so busy, but other times, it is because they are trying to hide something. Have your questions ready to ask! Make sure you get answers. Don’t be afraid to ask them to slow down or explain something over again. If you are not getting the answers you want, go to another dealership. You have already secured financing; a different manager can call the lender and request the approval to be switched to one of their vehicles if necessary.

Are there prepayment penalties?

If you have bad credit, you already know you are getting a high interest rate, so the best thing you can do is make extra payments toward the principle. Ask the finance manager if there are any penalties involved with the particular lender you are entering into an agreement with.

How long is the term?

Fantastic! The salesperson got you the car you wanted in your ideal payment range. Will your toddler be entering junior high before it’s paid off? Long-term means more interest and an increased risk of dealing with negative equity, if you want to trade the vehicle in after a couple years.

What is the interest rate?

You might feel a hard blow to the gut if you ask what the interest rate is; ask anyway! Also, make sure that the rate is not going to change at any time during the length of the loan as well.

I didn’t ask for an extended warranty; why is there one added?

You will find that many bad credit lenders require an extended warranty on the vehicle to ensure that it is properly taken care of. Although finance managers will try to sell you a lot of things, this really is something you want. Is it easier to pay a couple extra dollars a month in your payment or come up with several hundred for a repair?

Do I have to have life and disability insurance?

No! The finance manager will likely imply that you do and tell you what a good idea it is but you aren’t required to have it. That being said, sometimes it is a good idea to add to your loan. Disability is actually pretty smart to have, because if you can’t make the payments due to a disability, your payments will be made for you. Just because you can’t work, doesn’t meant that your family won’t still rely on that vehicle. As far as insurance goes, it depends on your situation. Again, if you have a family, do you want them to be responsible for paying for the car if something happens to you? If you don’t have a family, are you really concerned with the car being paid off if you’re gone?

You want me to pay how much for window etching?

No, you didn’t read that wrong, some dealerships charge as much as $500 for window etching. Well, at least that is what the finance department charges anyway. Does it really deter thieves? Sometimes it does. Can you buy an alarm and have the glass etched somewhere else and save a couple hundred dollars? Absolutely!

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