7 Tips for Saving on Your Baltimore Car Loan

If you have great credit, getting a Baltimore car loan at a great rate is no problem. However, in tight credit markets, some buyers with less than stellar credit may have trouble getting a loan at a reasonable rate.

There are lots of ways to finance your car, even without the best credit, but be careful–these may cost you a lot of money in the long run.

1. Try a Credit Union

Lately, many news reports have touted the fact that credit unions will often have the best rates. If you belong to a credit union, check there. If not, find one you can join. No matter what your credit score, chances are credit unions can offer you a lower auto loan rate because they are not-for-profit and owned by members.

2. Do Your Research

You will most likely pay more for your vehicle if you go see a dealer without good information about the vehicle you are interested in purchasing. Make sure you do the research and know how much you should be paying for your new or used vehicle.

The internet has made it easy to get this information–sites like AutoSmart, Kelly Blue Book or Edmonds.com are great resources for information.

3. Get Pre-Approved for Your Baltimore Car Loan

Apply for your loan to see exactly how much you can afford before you go shopping for your car. You’ll know exactly what your credit score is and what rate you qualify for through this process. You can then make your best cash deal.

If you already have your financing in place, beware of a dealer scam where the dealer will try to get you to fill out a credit application, even though you are not applying for credit. They claim it is required by the Patriot Act, but it is not. This is an attempt to run your credit and try to get you into the dealer financing.

4. Beware of “Choose Your Payment” Offers

Many dealers are now offering to let you choose your payment. While this may seem like a good idea on the surface, all it really does is extend the term of your loan, costing you thousands in extra interest payments and leaving you with a car that is worth far less than you owe on the loan.

As an example, a $20,000 car financed at 7% APR for 5 years will run you $396 per month and you will have paid at total of $3,763 in interest by the time it is paid off.

Taking that same loan, and choosing a payment of $250, you will be paying the loan for 9 years and will have paid over $7,000 in interest!

If you can only afford a payment of $250, choose a car that fits your budget, instead of choosing a low payment on a more expensive car.

5. Low Rate Financing vs. Taking a Rebate

It is generally better to negotiate the best cash price, take the rebate, apply it to the principal balance of your loan and finance at the best possible rate outside of the dealer. If you run the numbers, you’ll usually find you save money this way.

6. Purchase GAP Insurance

If you put less than 20 percent down on your new vehicle, you may want to consider GAP insurance. The minute you drive a new car off of the lot, the value depreciates significantly. If your car is stolen or totaled in an accident, you may find you owe more on the car than the insurance is willing to pay you.

Guaranteed Asset Protection (GAP) insurance makes up the difference. Don’t just take what the dealer offers you though! Check around because you can usually get the policy less expensively elsewhere (such as your credit union).

7. Consider an Extended Warranty

You may want an extended warranty/vehicle protection package, especially if think you may have trouble coming up with the funds to repair it on your own. If something goes wrong with the car, a policy such as this may pay to have it fixed. Before buying your policy, make sure you understand what is and is not covered.

Beware of the dealer requiring the warranty in order to get the loan. Many unscrupulous dealers will tell you that in order to sell you the product. Most likely, you will pay less for a warranty if you purchase it elsewhere. Shop around–it’s a choice, not a requirement!

A vehicle is a large purchase, and something you’re likely to have for a long time to come. Take the time to prepare for the purchase and therefore get the best deal. Do your homework and talk it over with people you trust before committing to anything.

This post was contributed by Destinations Credit Union