In this article, you will find the essential questions which must definitely ask before applying for car financing. Do not enter into a deal unless everything is crystal clear to you and you have obtained the answers to these questions without any ambiguity. Make sure that you have all the “extraordinary” claims made by the financing company or dealer written in the agreement contract.
1. What will be the interest rate charged?
The best way to know the exact interest rate that you will be paying on the vehicle financing is finding out the Annual Percentage Rate (APR). The APR is largely dependent upon your credit score. So if you have a good credit rating, chances are that you will get the loan at low APR. The car dealers and financing institutions like banks and credit unions, determine your credit rating through credit reporting institutions like Equifax, Callcredit, Experian and TransUnion.
2. Will the early payment incur penalties?
Sometimes, financers charge you with penalties if you pay the instalments earlier than the designated time period. There may also be some other obscure charges that may impose penalties upon you. Just be clear if you may be subjected to any other charges during the loan term.
3. What is the deposit policy?
Before you give the lender, you should necessarily inquire about the deposit policy. Be extremely sure whether the dealer or the financing agency will return the deposit or not if you change your mind. Get the answer typed in a written agreement.
4. What are the mandatory fees associated with the finance?
There are dealerships that already have fixed some fees to the cars. Unless you specifically ask this question, there is no way of you knowing it. Knowing exactly what you are paying for is important. Sometimes, dealers also include the advertisement fees, vehicle shipment charges, paint protection fees and other such charges.
5. Do you require credit insurance?
Sometimes the vehicle finance lenders either demand or offer car insurance. Asses if your existing insurance policy offers you the same benefit — if yes, the draw a detailed comparison between the two policies. In rare situations, lenders ask for insurance. In this case, you must carefully analyze how it will reflect upon your APR and make sure that it is incorporated in your credit.
6. What is the length of the loan term?
You need to figure out the exact terms of the vehicle finance deal. In order to avoid paying exorbitant amount as an interest, it is better that your loan term is shorter.
7. What becomes of your old car?
Never put the question to the dealer from whom you are obtaining the car financing and the car until you have agreed upon the cost of the new car. Trade-in prices are an integral part in the process of dealing so use it to your advantage. The dealer might try to offset the price of your car with the financing cost so make sure that you go through the breakdown of the cost very thoroughly.