Money Matters: Shop around for car loans

January 6, 2017 01:30

Sponsored by NEFE

Along with buying a home, some of the biggest purchases many people make during their lifetime are vehicles. They can be expensive, but are often necessary to get to work, buy groceries, shuttle the kids to activities and get around town. Whether you go for new or used, buying a car or truck will require significant savings, a loan or both, and not all loans are created equal. Almost 87 percent of new cars and 56 percent of used cars are purchased with loans, so it pays to shop around.

As Consumer Reports explains, people with great credit might get a low advertised rate, but if your credit is average, terms can vary greatly. Get a few quotes, not just from the car dealer or your usual bank. Keep the terms of the loan as short as possible. Lower payments may seem attractive, but the car may have lost much of its value by the time a five, six or seven-year loan ends. It pays to do the math. Sometimes dealers will offer a choice between a cash rebate and a lower loan rate. Crunch the numbers to see which would be better for you.
 
To help your readers/listeners/viewers find out more, talk with credit counselors in your area about the different kinds of loans that are available and how a difference of even a few tenths of a percent in interest can add up quickly over the life of the loan. Check around with local car dealers to see what kind of loan rates are being offered, and find out who is behind the loans. It may be the car maker's own lending arm, or a separate bank or credit union.

Sponsored by the National Endowment for Financial Education
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Steve Pomeranz of On The Money Radio entered the 2016 NEFE/RTDNA awards contest with a series of reports about Exchange Traded Funds, and some of the risks investors in such funds could face.