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Preparing Your Finances Before Buying a Car

Preparing Your Finances Before Buying a Car

By Jeff Youngs, February 24, 2012
Purchasing or leasing a new or used vehicle is a significant financial transaction with payments lasting several years for most consumers. To simplify the negotiation process and secure the lowest payment possible, it is advisable to prepare three orders of business before visiting the dealership:

  • Know your credit score and history--Contact the three major credit reporting agencies (TransUnion, Equifax and Experian) for a copy of your credit report to ensure the reported information is accurate and to learn how each of the agencies have scored your credit. The finance department at the automotive dealership will use this report, and your credit score, to establish the terms and interest rate on the new loan or lease.
  • Get pre-approved--While the dealership can typically make arrangements to approve you for a loan, interest rates and terms may be better at your personal bank, credit union or other financial institution. Contact your bank about a car loan and ask for a "pre-approval" before you visit the dealer. Let the dealer know you have been pre-approved for a loan, and they will often try to improve on the terms to secure the profit for selling the loan for themselves.
  • Know your payoff--If you have a vehicle to trade, contact the lien holder about the payoff amount (the outstanding balance on the existing vehicle sales contract). The lien holder will be able to provide the amount due on the account, including taxes and fees, and any other instructions regarding termination of the loan. The dealer will need this information during negotiations and at the time of sale.

Let the dealer know that you have prepared your finances up front. They will still need to run your credit, but there won't be any awkward surprises as to the content of your credit report and your creditworthiness. If your existing vehicle is paid off, bring the vehicle title or "pink slip" with you to the dealership as it is required to transfer ownership.

More New Car Buying Tips:
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