“You Don’t Have A Car? (Insert Laughter),” She Said!

Cars are such a pain-in-the-a%$, but without them our life would turn snail-like super fast! Sure, we could jump on the old bicycle and ride the ten miles to work, pick up a date or go grocery shopping (yea right) but then again … no we can’t (it’ll never work) because we, as Americans, are way too lazy and proud … you know this, man!

Ok, now that we have already established the fact that we need our cars, what about the people who don’t have one yet, or the people who keep dumping their hard-earned money into an old jalopy? It is for these exact same people that the rest of this article is written (for those of you who have a nice car, scram Sam. Did they leave? Good! Let’s proceed, shall we?). Well, you’re almost certainly going to need a loan to purchase your new car (unless you’re independently wealthy, in which case what are you doing reading my nonsense? Let me learn from you). When buying a new car, there is a couple of very simple, money-saving methods that are so obvious they are often overlooked. Not any longer …

Here are some very helpful tips that will save you a ton of money on your next car loan by avoiding the common pitfalls that you’re bound to encounter:

Get independent financing. Dealer financing is more expensive than bank financing — period! In fact, most auto dealers make even more profit from their “EZ” financing than they do from the sale of the car. Many dealers will try to pry out of your wallet as much as you can afford per month. This then gives them plenty of room to bump the interest rate up to that monthly payment level. Then they will sell the loan to a lending institution, and receive a commission based on the difference between what you’re paying in interest and what the bank normally charges. Sucks, huh?

Say NO to “Zero Interest” loans. Sure they sound attractive, but you’re going to be giving up a substantial rebate in return (mark my words). For instance, let’s say you’re buying a car for $20,000 and can either pay zero interest for 36 months through the dealer or receive a $5,000 rebate. The monthly payment on a $20,000 purchase at zero interest is $555.55. However, if you take the rebate and finance through a bank at 5 percent, your monthly payment comes to $437.49. You’ll save $118.06 a month, or $4250.16 over the life of the loan.

Know your credit score. Before shopping for any loan, be sure to look at your credit report for any inaccuracies that may be hurting your credit rating. Also, if you know well in advance, you can take the necessary steps to help improve your credit score by removing the certain risk factors (such as unpaid credit card bills) that may be causing a negative impact. Lenders largely base the rates they charge on your credit score, so by improving your credit, you should be getting a better rate (if not, they are trying to scam you. Walk away! Now!).

Leasing is not that bad. Good news: you aren’t required to pay the entire purchase price for the car, and monthly lease payments are typically a lot less than monthly loan payments. Bad news: you’ll have no resale value after you lease expires! Note: watch for lease specials to get the best deal, but make sure you read the fine print on those lease papers, including whether or not they included sales tax and fees into your “special”. Also, you should know that you’ll be paying a larger-than-average down payment to secure the lower lease rate. If you’re OK with all of this, by all means lease that puppy!

Before I get off my soapbox, let me tell you this: the absolute best way to save money on your car loan is to borrow less money in the first place and (uh oh, he’s going to say it) “Drop down a big deposit (yea, he said it). ” Also, negotiate hard on that purchase price (old lady-like) and don’t be afraid to walk away if you don’t think the car dealer is giving you a good enough deal. In a perfect world, any smart dealer would rather sell at a lesser price and sacrifice a little of his profit margin than miss out on the sale altogether, but in this world most of these guys aren’t that smart — be prepared!

Just remember this: you have to negotiate as best as you can, do your homework thoroughly, and always protect your credit rating — if all this sounds like too much work, then maybe you just don’t deserve a car (good luck with that whole public transportation thing)!