Accurate Auto Finance Advice and Auto Finance Tips

It's important that you not fall in love with a car that you cannot afford so your homework before you visit a car dealership or test drive a car for sale by a private seller.

By researching in advance you can decide how large of a payment you can afford each month and which kind of car meets your needs. You'll avoid any let down later if you only look at cars within your budget.

The first step in researching your new car is to work out your monthly budget. Once you know the real number you can spend on your car each month (remember, car expenses include insurance, maintenance, and fuel, not just payment), then you can begin narrowing down the type of car you might be in the market for.

Most banks don't have any idea what your expenses are, so they use an average to figure out what you can afford. To figure it out like a bank would, take your gross monthly income (that's the amount of money you get paid before taxes), and multiply it by 15%.

The AccurateAutoAdvice.com payment calculator will figure this for you too.

According to just about every bank in the United States, that amount is the most you can afford to spend each month on all of your cars combined. So, for example, let's say you earn $3000 a month before taxes. Fifteen percent of $3000, is $450 dollars. According to most banks, the most you can afford to pay for a car is $450 a month. Keep in mind that number includes all your car payments, so if you have a motorcycle, an ATV, a boat, etc., the amount of that payment is subtracted from the total. This method, called the payment to income method, is a good way to figure out the most you can afford. However, figuring your monthly budget is still the best way to make sure you get it right.

So now that you know how much you can spend, you need figure out what kind of car is within your price range. Again, there are online calculators for that purpose, including the AccurateAutoAdvice.com payment calculator.

Once you know how much you can afford each month, then you can begin the fun part of your new car research.

There are a number of resources for researching price, reliability, and user reviews of a particular car, including Edmunds and Yahoo! Autos. If you can get three positive marks in price, in reliability, and in user reviews, then you are ready to look into financing for that car.

Yes, the car dealership can set you up with financing without you lifting a finger, but Jason Lancaster says the accurate auto finance advice is for the consumer get pre-qualified as soon as possible. By doing so early in the process you'll save yourself time both in research and in the finance office at the dealership.

To get pre-approved, you can call your bank, your credit union, or you can use an online quote service to find out kind of loan you can get and what type of interest rate you'll get.

To pre-qualify, choose from this list of recommended online car loan quote services.

If you have a history of late payments, unpaid debts, collections, civil judgments, defaulted loans, or bankruptcy, you'll most likely end up paying a higher interest rate. If you're not sure about your credit history, get a copy of your credit report and read through it carefully.


Even if you have a better-than-average credit history, you can still end up paying a higher interest rate than you should if your available credit ratio is out of whack.

An available credit ratio is something lenders figure by adding up all of your available sources of credit-your home equity loan, credit cards, etc.-and then comparing it to how much debt you have. If you're using more than half of your available credit, lenders will often give you a higher interest rate because you fit the profile of a person that's living on credit. If you want to improve your available credit ratio pay off your debt.

If your bad credit is a problem, then do your best to pay down your outstanding debt and work to get more credit (a financial advisor can help you more with this). Another option, of course, is to take an auto loan with a high interest rate and then try to refinance later, but that's always a risk and not something you should count on-especially if you have bad credit.

Besides your personal financial situation, the car you buy could also affect your interest rate. The older a car is the more interest you're going to pay. A one- or two-year-old car will usually qualify for the same rate as a brand new car, but anything older could mean higher rates.

High-mileage cars are more expensive to finance and that means higher interest rates. Most lenders charge a steep interest rate for cars with more than 80,000 miles, and many lenders don't even offer financing for cars with more than 100,000 miles.

The reason? Once cars get that high in mileage, they're more likely to suffer a major break-down. Many people, when they realize they can't afford to fix a major repair, simply stop making payments. The bank wants to avoid this scenario so they charge a high interest rate to discourage you from buying a high-miles car.

If you are watching every dollar, then consider a newer car. You may save money in the long run.

So you've found the car you want to drive and can afford, and you are pre-approved for a loan with a great interest rate, what's next?
Now it's time for you to go to the dealership to test drive the car and to negotiate the price. The topic of negotiation should be a lens all in itself, but what we'll cover here is just a basic discussion covering negotiation and auto finance tips.

To start, make sure to negotiate not just the price of your car, but the amount you get for your trade-in, the inclusion of any features or accessories you want for the car, and an extended warranty.

All of these items should be researched in advance so you are prepared at the time of the deal. Before you agree on the final number, make sure you've discussed these three items with the sales manager.

Once that final number is decided on, then it's time to head to the sales office.

In just about every finance office at any dealership in America there will be five documents for you to review and sign at the time of a sale. These documents include bill of sale, odometer disclosure, buyer's order, contract, and bailment agreement. Make sure to bring everything with you listed in the above list. If you have this information with you, then the financing process will go much smoother and much quicker.

Whatever extras you don't negotiate with sales manager up front, they will probably try to sell you them when you are in the finance office. Whether its a security system or an extended warranty, the bottom line with all these products is this: You should consider everything the finance manager offers you because 90 percent of it is valuable and worthwhile. Just remember that most of the products he or she offers you will be overpriced. You're better off telling them you want to think it over and then taking the time to price these extras somewhere else. If you decide you really do want what they are selling, then you can always call back later once you realize you can't get it any cheaper.