Auto Loan Process

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There are a number of important progressions that should be followed in order to get the best deal possible on either a new or used auto loan.
  1. The first stage involves knowing both your credit history and your credit score (usually called either a Beacon score or a FICO score). Both your payment history and your score will determine what type of auto loan you qualify for - prime, near-prime or subprime.
  2. The next stage involves thoroughly researching the type of vehicle you're interested in. At this point, it is important to determine just exactly what you'll need in terms of vehicle size and performance, as well as how this vehicle will fit into your overall budget. Choose at least two different models and test drive both vehicles well before the day you plan to buy one.
  3. Additional research is required for the third stage. At this point you need to option out the vehicle the way you would like it then determine the suggested retail price (MSRP) as well as the dealer invoice price. You should also check to see if there are any customer cash or rebate programs that could further reduce the selling price and the amount of the auto loan. If you're considering trading in your current vehicle, you should also research its market value.
  4. When it comes time to negotiate the price, it's always a good idea to keep the new car and trade-in negotiations separate. Keep in mind that the bottom line in any transaction involving a trade-in is the difference amount. The lower the difference amount, the lower your auto loan monthly payment will be.

Auto Loan Paperwork

Finally, and most importantly, don't take your "eye off the ball" until you've completed the final stage which is the paperwork process. Keep in mind that you are not signing a contract with the dealer; the dealer is merely acting as an agent for the lender. If something you negotiated during the buying stage is not in the contract or on the buyers order, than it doesn't exist. And since there is no cooling off period for a car loan, this means that once the papers are signed, the deal is final. For this reason you should take the time to read over all the paperwork before you sign the auto loan agreement. Make sure everything contained in the paperwork matches the terms that you agreed to and, as always, get a copy of everything that you signed at the time of delivery before you leave the dealership.