A lot of new car buyers will appreciate the latest
automotive trends expected to take shape in 2006 and beyond. A greater
variety of downsized, fuel-efficient SUVs will be available. New vehicle
safety features like tire pressure monitors will reach the market. And
sales promotions like last summer’s employee discount campaign are
expected to set the stage for year-round, no-haggle vehicle pricing.
But a less-publicized automotive trend – rising
interest rates – will make 0-percent car loans a rare breed in 2006.
Increasingly, consumers will need to comparison shop for their car loans
before they go to buy, just as they do for the vehicles themselves.
According to Bankrate.com
, interest rates on new car loans rose steadily throughout 2005 and the
pattern is expected to continue into 2006. The difference of just two
percentage points on your APR can either save or cost you more than
$1,400 over the life of a typical loan.
"Many consumers do not realize that they have
other options for financing their car, outside of the dealership,"
said Brian Reed, vice president of Capital One Auto Finance. "There
are some great options for consumers to finance their car on a direct
basis, versus relying on the dealer to provide that service for
you."
Because education is the key to getting the best
deal when financing a car, Capital One Auto Finance offers prospective
car buyers the following helpful tips:
Set a realistic budget. Choose a vehicle that won’t
overextend you financially. A general rule of thumb is that no more than
15 percent to 20 percent of your total monthly budget should go toward
all your car-related expenses.
Verify your credit record. Order a copy of your
credit report to ensure it’s accurate and in good shape. Correct any
errors before applying for a loan.
Comparison shop for loans. Check out credit
unions, banks and online lenders to see what rates are available in the
market, so that you know a competitive rate when you see one. Visit Web
sites such as www.bankrate.com and www.capitaloneautofinance.com.
Arrive with financing in your pocket. Having
approved, no-obligation financing in hand gives you a competitive
advantage when you go to buy, giving you the power of a cash buyer. If
the dealer offers a better loan rate, you can take it with no penalty.
Approach your purchase as three transactions. It’s
best to treat each part of the purchase separately: 1) financing; 2)
trade-in; and 3) vehicle purchase. This will simplify the process and
maximize your negotiating opportunities.
Match length of loan to expected length of
ownership. Select your loan term based on how long you plan to own the
vehicle. Buyers who take out longer-term loans can find themselves “upside
down” on their loan (owing more money on the car than it’s worth in
trade).
Review your financing terms carefully. Make sure
you know your interest rate, monthly payment, amount you are financing,
the length of your loan and your trade-in value.
“If car buyers would spend just a fraction of
the time researching their auto loan as they do the latest features on
their new car, they’d be surprised at how much money they could save,”
said Reed of Capital One.
