If there were ever a time that could be considered a buyers' market in the domestic automobile industry, this would probably be it. Cash rebates are rising (some SUV buyers are pocketing as much as $6,000), and 0% financing deals are as common as balloon bouquets in a Chrysler showroom.
Before you grab that dangling set of keys, tap the brakes. Exactly how are you going to pay for that dream ride?
Car dealers can certainly arrange financing for you. These days some car companies make more from their financing arms than their flagship automaker business. And while the deals they offer may sound good (and may in fact be good), a little shopping around will reveal a surprising range in rates.
Your bank, your credit union, or other local banks can offer loans, as can some car insurance providers such as State Farm. Even the local American Automobile Association (AAA) office may be able to help you out. And, of course, online is perhaps the easiest place to comparison-shop.
Once you've found a good rate, resist the urge to stomp on the accelerator. There's more wheeling and dealing to be done -- only this time it's with the dealership's finance and insurance manager. That handsome devil sitting in a back room glued to his computer is the guy in charge of ringing up profits (financing, insurance, fabric protection, extended warranty). Say no to whatever extras you don't want. But go ahead and show him the paperwork for the loan that you plan to use and see whether he can beat it.
What about those $0 down, 0% interest, and zero payments for a year deals? Unfortunately, many dealers aren't that bighearted when it comes to financing. You might be hit with all the monthly payments -- plus retroactive interest -- once the year is up, or be contractually forced to refinance the balance of the loan at a higher interest rate. Then there's the dealer whose ad says, "We'll Pay Off Your Loan!" Don't kiss your old car debt or lease good-bye just yet. More than likely, the dealer means he'll roll the amount owed on your old vehicle into your new loan.
If you decide to take a 0% financing deal, take the contract home to read aloud to your cat until you both understand it. Mark your payoff date (when finance charges begin) clearly on the calendar, and figure out how much money to save each month to cover the bill on the due date.
Of course the best car financing deal is with You, Inc. The best way to avoid all interest charges and uncomfortable conversations in the dealership is to pay cash and pay in full. That's certainly something to toot your horn about.
