Current national interest rates for a 60-month loan on a new car are averaging 5.24%. You won’t see finance rates any lower than that. And it will be a long time before you see them that low again. If the economy starts picking up, and it’s showing some signs of improvement now, then interest rates will surely rise. That means any car purchase you make in the future will cost you more in the long run. You can save money – maybe even thousands of dollars – by financing your automobile right now.

New auto loans can be lower than used auto loans. In fact, if you finance a new car purchase over a 72-month period, you can get a loan rate of below 4%. Not only will your monthly payments be lower, but you’ll save money on the interest rate too.

That’s why I believe now is the best time to buy a new car on loan. It’s never been better.

1. What is the interest rate? This is expressed as APR – Annual Percentage Rate. This rate will determine your monthly payments. But you should note whether it is in the same vicinity as prime, or market rate for similar loans.
2. Are there any penalties or hidden fees? Some car finance companies will apply a penalty if you pay your car loan off early. You’d better know that before getting in. And also ask if there are any hidden fees. All your fees should be disclosed right up front.
3. How much are you paying for the vehicle? This is the actual price at the end of your loan period. The cost of the vehicle, minus your down payment, plus the amount you pay in interest over the life of your loan plus any fees associated with your loan.
4. What is the total amount you are being finance? This can often be tricky. It’s hardly ever the exact price of the vehicle. If you put money down, then that money will be subtracted from the total price of the vehicle before you start making payments. Find out if any of the fees for your loan can be rolled into the loan. Even if they can be, you might not want them to be. Find out how that affects your loan.
5. How much are your payments? Find out the exact amount of each monthly payment during the loan period.
6. What are the total number of payments you’ll be making? If you enter into a five-year loan, that’s 60 payments. A four-year loan consists of 48 payments.

When you’re ready to finance the purchase of a new vehicle, be sure you ask lots of questions. Find out the true cost of your car financing.

• Pay cash
• Make a trade
• Monthly installments
• Borrow money from a friend or relative
• New car financing

Paying cash might seem like the best way to purchase a new car, but unless you’ve got $15,000-$30,000 laying around it’s probably out of reach for you. Many people like to pay cash and that’s fine, but they likely buy used cars and usually buy from individuals. Those automobiles could have serious mechanical issues so you’re always on a “buyer beware” notice.

Many car dealers allow you to trade in an older automobile for a new one, but you still end up owing for the difference between your trade-in value and the retail value of the car you’re buying.

Some car dealers allow you to purchase on a monthly installment plan. Those car dealers are usually tote-the-note lots and you end up paying more than the car is worth. You still have to pay interest and the cars typically start out with a price tag higher than the real value of the automobile.

Most people don’t want to borrow from friends or relatives. That can often complicate your relationships.

New car financing works for many people because you know you are getting an automobile that is worth the price tag, there are fewer mechanical problems, and a new car is still under warranty. Financing a new car is less risky than other methods of purchasing a car. That’s why it is offered and that’s why car buyers use it.

Some specific information to look for that your auto loan lender will likely disapprove your loan for are:

• Negative judgments such as liens, auto repossessions and consistently late payments
• Too much debt relative to your income
• A large volume of revolving credit

If you have a mechanic’s lien or an auto repossession on your record then your auto loan lender will likely not approve you for a new car loan. Those are red flags that are difficult to get past. Clean up your record before applying for a new car loan and you will increase your chances of getting that loan. Make sure that you make good on all your payments for any outstanding loans for 6 months to a year before applying for a new car loan. Consistently late payments will not look good and could result in you having higher car payments or a higher finance rate, if you get the loan at all.

Likewise, if you have a high debt-to-income ratio then that will not go favorably for you. Reduce your debt before applying for a loan.

Another thing that will count against you is a lot of revolving credit. This is debt that has no set number of payments. For instance, credit card debt. If you have a lot of such credit on your report then you will appear to be a high risk and the auto lender will not give you a loan.

Make sure you clean up your credit report before applying for a car loan. You’ll stand a better chance of getting your financing.

Of course, if you are one of the people who still distrust the Internet then you can still apply by phone, but let’s count the benefits to applying for a car loan online:

• Less embarrassment. How many times have you sat down to fill out a loan application and needed personal information about yourself that you forgot to bring with you. You either had to leave and go home to get the information or call someone to tell it to you over the phone – while the credit manager sat and watched. No more embarrassing moments. You can fill out your loan application in the privacy of your own home where you already have all the information you need.
• Complete security. Believe it or not, sending information online is more secure than sending it by phone. Phone wires can be tapped and cell phone messages are never secure. However, due to encryption technology, sending personal information online is safe and secure.
• Fewer distractions. Since you are filling out your auto finance application in the privacy of your home with no one sitting in front of you, there are fewer distractions. No credit manager asking you questions and no background noise – unless you turn on your own TV or radio.
• Quick approval. When you apply for credit at most places, you have to wait. But not when you apply online. You can find out if you’ve been approved within seconds.
• Your information is private. All Federal, State and Local laws that apply to personal privacy apply online as well. Your information will not be handed out without your prior approval. Your privacy is protected.

Applying for auto financing online is safe and secure and you’ll get approval faster than applying for credit by traditional means. Super lightning fast!

Most credit information remains on your credit report for a period of seven. The exception to this rule is bankruptcy, which can remain on your report for ten years. If you have unpaid judgments against you then the statute of limitations on those judgments can exceed seven years.

The best way to remove negative information from your credit report is to go back to your creditors and request that the information be removed in exchange for your payment. This is usually very effective. Creditors just want their money.

However, after you remove negative information from your credit report, if you have no new credit then you all you’ll have is a blank credit history. That doesn’t do you much good either. It’s time then to begin building credit to increase your credit score and improve your credit rating. Financing an automobile purchase can be a good step in that direction

If the purpose of purchasing an automobile is to restore your credit, don’t buy a new car. Buy a used car instead. Work your way to the large purchase by improving your credit score first.

Follow these steps to repairing your credit with auto financing:

1. Find a good, trustworthy tote-the-note auto dealer
2. Locate the vehicle you want to purchase (Try to stay within a reasonable range based on your income and credit repair goals; a good rule of thumb is to purchase a vehicle between $1,000 and $2,500 on credit.)
3. Apply for a line of credit for auto financing.
4. Faithfully make your monthly payments on time (Late payments will work against you and decrease your credit score rating.)
5. After making monthly payments for at least six months, you can go ahead and pay off your car loan. The six months of good credit history will improve your credit score. Now you can make larger purchases on credit and get better terms.
6. When you are ready to purchase another automobile, take the vehicle you are currently driving and trade it in on another vehicle. Again, make sure you pick a vehicle in the price range of your budget and credit goals. Don’t get in over your head. That’s how bad credit develops.

It is not always less expensive to purchase a used car. Pre-owned vehicles can have their own hidden costs. For instance, if you buy an older vehicle you may have to pay for constant maintenance, which could be more expensive than purchasing a new car over the long run. Aside from that, a used car can also be more expensive than a new car depending on the make and model and the dealer from which you make your purchase.

The best way to decide whether to buy a new or used car is to research the specs on the individual makes and models in which you have an interest. Don’t just read consumer reports. Although they are helpful, you should also ask your mechanic what kind of issues are typical of a particular make and model of vehicle. If you know, for instance, that a specific auto part is replaced in the majority of vehicles of a particular make and model after five years and that car part is expensive then you might give a second thought to purchasing that make and model of a four-year-old used car.

Financing terms might also be a deciding factor for you. If you can get better terms on a new car than you can on a used car then it could make a difference in your total cost over the term of your auto loan. It’s important to consider all the factors.

Auto dealers themselves can also be a great source of information. Your car salesman can give you the details on particular specs for new and used cars in their inventory. At the end of the day, which type of vehicle you purchase depends on what makes you happiest.

Having a Large Balance
About one-third of your credit score depends on your ratio of debt to available credit. As a result, the higher balance you are carrying in total, the lower your credit score is going to be. The new CARD Act requires credit card companies to include a graph on how long it will take you to pay off your particular balance if you only make minimum payments. They must also show you how much you would need to pay on your balance each month to pay it completely off in three years. These and other tools can help you lower the balance you are carrying and raise your credit score considerably.

Opening New Accounts
Every time you open a new credit account, you damage your credit score. The amount of damage you do depends on your current score, the type of account you open and how soon you open new accounts after opening others. Companies check your credit when you apply and each inquiry can drop your score by about five points. You can also risk up to 15 points just by applying. These dings to your report are short-lived, but they can mean higher interest rates if you do not wait until they drop off your report before applying for that auto loan.

Not Paying
Other than late payments, defaulting on your credit card balances is the worst thing you can do to your credit. Unfortunately, more and more people are defaulting these days due to the economic problems we are having. These bits of information will follow you for at least seven years, but you can still start rebuilding your credit as soon as possible.

Today’s interest rates are lower than they were a year ago. As a result, if you purchased your vehicle at least one year ago, you would probably benefit from refinancing the terms of the loan. Imagine saving an extra $100 per month! You could buy extra groceries, put the money into a retirement fund or simply have put it towards the car loan and pay it off even earlier. It just seems like a car has a smoother and more comfortable ride when you do not owe any more payments on it.

If you have not had your vehicle for at least a year or if you do not qualify for a lower interest rate at this time, take control of your finances and pay your bills on time and reduce your amount of debt. This will bring your credit score up and qualify for better interest rates. You will save tons of money in the long run and put yourself in a better financial position.

Car dealerships often work with certain banking institutions and lenders for people who are financing their vehicle. Some dealerships will even have lenders “on-site” so you can discuss your auto loan directly with them in person. However, you can also visit your own bank or credit union to discuss getting a loan for a car. They can tell you how much you will be approved for so you have an idea of how much you can afford. Your bank may also offer you a lower interest rate than the dealership’s bank or lender.

Your bank may also offer more services like checking the value of the car you want to purchase against its actual market value. This can help because you will know if you are getting a great deal or if you are paying much more for the vehicle than it is actually worth. Your bank may not loan you the money in the latter case because if you default, the car is not worth enough to pay off the loan. Your bank’s representative may also even call the salesperson at the dealership that you are dealing with and tell him that they will only allow you to borrow a certain amount of money and you may get the car you wanted for a lesser price, but this rarely happens.

If you have been considering buying a new or used car, get down to your local dealers today and take advantage of the lower interest rates. You never know when those rates are going to be this low again!