Help! My New Car Financing Has Eaten My Raise!
Let's take a look at the facts: Housing prices are rising at a
clip of 10-15% per year, tuition costs are rising by an average
of 10% each fall, and energy costs - well, the average rise in
prices depends on the week you happen to be looking at, but
double-digit increases have been the norm for the past few
years. And now, the really depressing fact: Average wage
increases have hovered between a measly 3 and 4 percent for the
past three years. Now what, you ask, does any of this have to do
with car financing?
Hey, as simple as can be stated, it boils down to numbers.
Interest rates: These are the hidden little killers that can
destroy retirement plans and lifestyles over the course of a
lifetime. Car financing is the second most important
credit-related decision you will ever make, the first being the
mortgage on your home. So, just as an example, let's say that
you make $30,000 per year and are looking to finance a $25,000
car over five years. The difference between attaining approved
car financing at 6% interest and 16% interest equals $130 per
month if you take the loan out over 5 years! And here's the
clincher - a 3% annual increase in salary will net you an extra
$900 per year (and that's before taxes), while saving $130 per
month on your car financing puts nearly $1600 more dollars in
your pocket. (And hey, that's after taxes!) Even a few
percentage points difference on your car financing can actually
equal or exceed the raise you got from work this year!
I had no idea those tiny numbers could add up to so much money!
What is my best option for getting an approved car finance plan
- with the lowest interest rates?
In the end, your credit rating, and the interest rates it
commands, can make or break you over the course of your life.
Car financing is not rocket science, but you really have to be
careful with the numbers - or you can end up paying thousands of
dollars more than you have to. Your best approved car finance
option is probably going to be obtained through a bank or credit
union. The great things about getting your car financing through
a bank is that you tend to get the best rates, personalized
service, and you don't have to worry about some pushy car
salesman trying to shove useless add-ons down your throat every
five minutes! However, banks and credit unions have higher
car-financing standards, so you need decent credit to consider
this as an option.
But wait a minute - the banks always take forever to process a
loan, and the salesperson at the dealership can get me approved
in minutes!
This is very true. But there is a price for that convenience,
isn't there? The dealer almost always offers you a higher rate
on car financing - and be prepared for them to try and sell you
every single add-on you never wanted in the hour it takes them
to fill out the paperwork! That approved car finance arranged
through the dealership may save you a week over financing
through a bank - but just a few percentage points difference in
interest rates can easily cost you $1,000 more each year for the
entire length of your loan. So in the end...how much is that
week worth to you?
All right...the dealer can be a bad option for car financing -
but what about those online places that can approve me in
minutes?
In all honesty, the Internet can be a great place to secure
approved car finance. With the ability to hop around and shop
the different sites, you can definitely get some decent interest
rates, sometimes comparable to those offered by a bank - plus
you can get approved in minutes, and be driving your new car in
a day or so. So what's the catch? Well, the Internet has more
than its fair share of scammers just looking to get your social
security number and other vital information. If that car
financing information ends up in the wrong hands...well, you can
do the math! Plus, the 'Net can be terribly impersonal at times
- but it is still a viable option for approved car finance at
competitive interest rates.
Impulsive and poorly made car financing options can literally
cost you the price of an entire new car over the course of your
life. Approved car finance is available through a number of
outlets, and each has its own benefits and disadvantages.
However, if you want to be able to afford actually driving your
new car someplace other than home and work for the next few
years, you may want to avoid the inflated car financing, AND
those useless add-ons, offered by dealerships.