Buy New, Buy Smart!

There’s nothing like buying a new car! Over 17 million new cars hit the road in 2006 alone! The average price of a new vehicle ranges between twenty and twenty-five thousand dollars. Buying your automobile new is an important investment. Besides owning a home, buying a new car is the biggest purchase most people make. Consequently, you need to take the time to decide what’s best for you when choosing your automotive financing route.

Dealerships

If you’re buying your car new, one of your first financial decisions regarding automotive financing is going to be whether or not to finance your vehicle through your dealership. Dealerships offer exciting benefits for customers who choose to finance their car directly through the dealer. For example, you might be offered an extended factory warranty. But dealerships generally offer automobile loans at less competitive rates than banks or credit unions.

Banks

Banks generally offer more competitive deals on auto loans than dealers. Additionally, unlike a dealer, your banker won’t be able to distract you by dangling the car of your choice in front of your eyes. If you choose to finance your car through your own bank, pay attention to the terms of your loan agreement—many banks will freeze your assets if you miss just one payment. This can be a problem for consumers with cash flow problems. Alternatively, if you choose to finance your car through a competing bank, you may be required to open a checking account with them with a minimum balance to the tune of $1,000.

Credit Unions

Credit unions are another popular alternative to banks and dealerships for buyers in need of automotive financing. Credit unions offer competitive rates and terms on automotive financing in order to attract customers. However, many credit unions are essentially local, community banks. As such, their customer service may be limited. That means if you have problems or concerns throughout the life of your car loan, you may find yourself working on their schedule and not yours.

Shopping Around is the Best Decision

Before you choose to finance your automobile directly through the dealer, shop around for an alternative car loan through a bank or local credit union. After comparing interest rates and loan terms, ask yourself if your dealership’s benefits compare to your other options. It’s also important to determine an affordable monthly payment within your personal budget before you decide on a car—not the other way around. You might also consider leasing a recently pre-owned model that’s one or two years old through your dealership.