But rising interest rates, a less-talked-about trend in cars, will make 0% car loans hard to find in 2006. People will need to compare car loans more and more before they go to buy a car, just like they do for the cars themselves.
Bankrate.com says that interest rates on new car loans went up steadily all through 2005 and that this trend is likely to continue into 2006. Over the life of a typical loan, a difference of just two percentage points in your APR can save you or cost you more than $1,400.
Brian Reed, vice president of Capital One Auto Finance, said that many people don't know that they can finance their car in ways other than through the dealership. "Consumers have some great options for financing their car on their own, instead of relying on the dealer to do it for them."
Because knowledge is the key to getting the best deal when financing a car, Capital One Auto Finance gives the following tips to people who want to buy a car:
Make a budget that makes sense. Choose a car that won't put too much strain on your budget. As a general rule, you shouldn't spend more than 15 to 20 percent of your total monthly budget on your car and all its costs.
Check your credit history. Get a copy of your credit report to make sure it is correct and in good condition. Fix any mistakes before you ask for a loan.
Check out different loans. Check with credit unions, banks, and online lenders to see what rates are out there so you'll know when you see a good rate. Check out websites like www.bankrate.com and www.capitaloneautofinance.com.
Bring the money you need with you. When you go to buy something, having approved financing with no strings attached gives you an edge over other buyers, giving you the power of a cash buyer. You don't have to say no if the dealer gives you a better loan rate.
Think of your purchase as three separate deals. It's best to handle each part of the purchase separately: 1) getting financing, 2) trading in your old car, and 3) buying the car. This will make the process easier and give you more room to negotiate.
Match the length of the loan to how long you expect to own the home. Choose the length of your loan based on how long you plan to keep the car. When a buyer takes out a loan with a longer term, they may find themselves "upside down," meaning they owe more on the car than it is worth.
Carefully look over the terms of your financing. Make sure you know your interest rate, your monthly payment, how much you are financing, how long your loan will last, and how much your old car is worth.
"Car buyers would be surprised at how much money they could save if they spent even a small amount of time researching their auto loan the way they do the latest features on their new car," said Reed of Capital One.
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