Financing a Car

Financing a car can be tough, especially in a down market when adverse economic situations occur and lenders pull away from customers. Situations like this can make things more difficult for car buyers who want to finance the purchase of a vehicle, but an individual's credit has a direct effect on their ability to obtain good financing from either a dealership or another lender. A good credit score can open the door to good financing.

APR or annual percentage rate is the amount of interest that will be added to a car buyer's financing bill. This may sound like some trivial detail, but it's not. The APR makes all the difference in finding an auto loan you can pay off and avoiding repossessions, charge offs and other unfortunate circumstances.

To get a good APR and good financing for your car, do not step into the dealership's door without knowing a few basic things. First, figure out your credit score and whether it will adversely affect your ability to get financed by an "average lender." You can get your credit report from one of the three credit agencies. Then, compare it with online resources like those at myFICO.

Another way to get a good APR is by exploring other lenders first, before dealing an auto dealership. If you are buying new from a car company, try the captive financing company for that auto maker. Also, be sure to check your employer's credit union if applicable. Then, go to your bank and other local banks, and ask them about your lending options.

When a car buyer knows what they are "worth" in terms of financing, then they can make deals with the care sales staff, without getting stuck with a high APR and a bad auto loan.