How to save money by pre-arranging car finance.
We all want to save money when we buy a car. We always have and always will. However it has become more important for more people to save money on their car finance in the current economy. The happy news is that it is possible to make serious savings when buying a car if we simply follow the right advice. Of course good advice is always hard to find and it is never good idea to follow blindly any source no matter how respectable it seems. The best course of action is to read widely and consult with unbiased professionals. You can start with this article and check with others and finally make your own mind.
What is pre-arranged car finance?
Pre arranged car finance is a pretty intuitive term that explains itself. It describes the understanding you have with a bank or finance company on how much they are willing to lend you at a moment’s notice if you decide to buy a car. The advantages of pre-arranging car finance before you even start looking for a new vehicle are many.
Save time on paper work. When you pre-arrange your car finance the loan is not based on the car you buy but on your personal credit. The bank might require details on the car you finally buy for information purposes but the deal is done as far as it concerns the financing. The paperwork the bank will require includes proof of income, credit rating and other particulars that can be provided before the car is even viewed. This simplifies things considerably when compared to car loans that rely on the bank approving the purchase of a specific car at a specific price
With pre-arranged car finance your finance provider effectively gives you a line of credit to a certain amount. You decide how much you spend within that line of credit.
Greater bargaining power is one of the advantages of having pre-arranged your car finance. In fact buying a car like this is like buying with cash. We all understand the advantages of buying with cash, car dealer do also. Having pre arranged car finance will not only help you get a better deal on the car itself but also on the financing. Taking finance from the car dealer is rarely a good idea but if you already have good finance with your own bank or finance company it does no harm to see if the car dealer can improve your conditions. The only thing to be careful of is that the car dealer guarantees the finance is a done deal in writing. A favorite scam for many car dealers is to sell you car finance and then inform you that sadly the financing has fallen through and you will have to accept other conditions. You now own the car and have no finance to fall back on and are basically at their mercy.
As you can see there are good reasons for arranging your own finance. If you are buying a new or used car save money by pre-arranging your own car finance.
Post crisis car finance, the new rules.
He that doesn’t adapt is doomed to die. That concept is thrown around in all walks of life. Car finance is no exception. Banks and car finance companies have had to adapt to the new circumstances in order to excite timid and scared consumers into buying a borrowing again. Why do we say new rules? And if there is a new way of getting car finance, how can we get in the driving seat and make it work for us?
According to many economists one of the factors of the current recession was a serious credit crisis. People were borrowing more than they could afford and more and more banks were using bad loans as securities that were not worth the electronic blips they were written on. People in general will still spend more than they can afford, borrow more than what they can pay back. In order to protect the credit system the government has set in new guidelines. Banks have set out more stringent credit risk assessments, making it harder for the average client to get car finance or any kind of finance for that matter.
What are the new rules of auto finance?
The new rules of auto finance are the new rules of finance in general. How long they will last is anybody’s guess but if you are to be successful in getting a decent car finance deal you must adapt, and quickly.
As we said above the credit crisis spelled out what many already knew, that the system was faulty and did not protect either the borrower or lenders from their own greed. The new rules of finance aim to make it harder to get a loan or finance unless you can afford to pay it back. Credit rating has become more important when looking for car finance and more stringent guidelines are followed when assessing the income / debt ratios of borrowers.
The interesting part of these “new rules” is that both governments and banks want us to continue spending and borrowing. In fact many believe that the only way to get out of this recession is to BUY our way out. The idea is that capitalism needs consumers to continue buying for the economy to have a fighting chance. Of course this is mighty difficult when government and banks have increased the difficulty of getting car finance. For this reason the government has lowered the interest rates, invested in banks and even insured the loans banks provide. This has created a marketplace for car finance that has rarely been so attractive. Interest rates are at a record law. The only problem is that to qualify for these loans has become much harder. In our current economy having great credit rating has become much more important. In fact if you do have the right income and credit score you can apply for auto finance that has never been so cheap.
You could even refinance your car loan with current interest rates and save yourself a small fortune. Be smart and adapt to the new rules of car finance.