Your Car Purchase

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Buying a new car can be an emotional and stressful experience, but if you take the time to prepare and ask the right questions, you can secure financing to fit your budget. Here are some tips.

• Shop the loan separately from shopping for the vehicle. The potential trap lies in searching for financing to fit the purchase price rather than your budget.
• Prequalify for a loan before visiting dealerships. You’ll avoid becoming a victim of auto loan markups, which occur when lenders allow car dealers to mark up auto loans above the “buy rate” reflecting the actual creditworthiness of borrowers. A growing body of evidence reveals that hundreds of thousands, perhaps millions of consumers, particularly African-Americans, have trusted auto finance companies and car dealers to charge them fair and reasonable rates, only to be subjected to markups that, in the past, have often exceeded 5 percentage points.
• Steer away from discussing the car’s price in terms of monthly payments. A dealer can get you to that monthly payment, but you may repay the loan over a longer period or pay a larger down payment.
• Estimate the amount you need to finance the vehicle. The formula is the purchase price of the car minus any trade-in equity, cash down or customer rebates. Using this amount and the interest rate you were quoted when you prequalified, you can then calculate an approximate monthly payment.   

The Internet allows car buyers to do comparative shopping and pricing in the privacy and comfort of their home. All of the manufacturers have Web sites that offer product information. Most of the sites will allow you to configure a vehicle with any combination of options, then compare it with competitors’. You can e-mail questions to the manufacturer and request additional information via the Internet. You can also locate auto dealers in your area.

Third-party Web sites allow you to research information for new or used vehicles. You can read reviews for new vehicles, and search recall and service reports as well as reviews of used vehicles. Edmunds.car, Carmax.com, Autobytel.com, Cars.com and UsedCar.com offer information, pricing, dealer locations and tips on buying used cars. Many of these sites will allow you to advertise your used vehicle. You may pay a percentage of the sale price or pay for classified advertising, which is similar to advertising in a newspaper. Kelly Blue Book at kbb.com or NADAguides.com allow you to determine the selling price of your used vehicle or estimate the value of a particular used car for trade-in or purchase.

Remember, it costs more to insure a sports car than a compact vehicle and, if you are under the age of 30, certain vehicles will cost more for you to insure than others will.   
—J.M.