At one point of time in history, owning a car was one of life’s unparalleled luxuries but that has long passed. Considering the amount of running around that one has to do, it is almost impossible to do without a car. Unfortunately buying a new car remains a very expensive proposal and consequently a booming market in pre-owned or used cars has come up. Owning a pre-owned car that is chosen with care makes a lot of economic sense as new cars tend to lose a lot of value the minute they are driven off from the showrooms. You can get some really good deals on used cars if you know a little bit about them. A safe way though is to purchase certified pre-owned cars that have the dealer’s warranty in force protecting your investment.
Used Car Financing
While used cars are great money savers, they can still cost quite a lot in absolute terms so you may need a car loan to bail you out. Regretfully, even though there’s a booming market in used cars, the action on the financing front does not seem to have developed a lot. You will possibly not see too many offers for zero down-payment or slashed interest rates by the dealers. The best way of getting a good deal is to first bargain very hard with the dealer and then approach a bank or a credit union for a loan, in case the dealer cannot give you a finance offer on reasonable terms.
The Importance of a Good Credit Score
The first thing lenders will want to check out when you approach them for a car loan is your credit score. This enables them to decide if you represent a reasonable credit risk and how much the rate of interest they should charge to offset that risk. The better your score the more attractive terms you are likely to get from the banks, though financiers have a host of other parameters that they use to decide to structure an offer. You can visit the website of the Federal Trade Commission to get more information about credit scores as well as resources on building a better credit profile. You can also get a free credit report that will arm you with valuable information and enable you to discuss better with the banks.
What Do Banks Check Out On Before Extending a Loan?
The first thing a bank does is to check whether the loan application fits their lending portfolio. Only banks that do retail financing will extend car loans. The bank is only concerned whether it will get its money back on the terms it has offered so it is focused on establishing whether you are a good credit risk. The bank will usually verify whether you are making timely payments on the other loans and mortgages that you may have taken as well as your credit card outstanding as this tells them how efficient you are in managing your finances. The credit score is a reflection of this.
The bank will also want to know the details of your current debt exposure as they are always concerned whether their customers are taking on more debt than what they can possibly service properly. Even if you have a decent credit score if it appears to the bank that the fresh loan is likely to break your back, it may not be willing to extend the car loan. The length of your credit history is also of great interest to credit unions and banks as a consistent and timely payment history over a large number of years is an extremely good indicator of your future behaviour.
Author bio: Charlie Brown is a sales manager at a leading used car dealer. An avid blogger, he has to his credit a number of articles on evaluating and buying certified pre-used cars.