In our current economic climate, dealerships are doing just about everything they can to sell more cars.
- Some companies result in spamming consumers, filling your mailbox or email with advertisements that promise big sales or discounts.
- They claim they can get you into your brand new (or used) dream vehicle, even with bad credit.
- As enticing as their mailers claim to be, they just want to get you into the door, so the salesperson can work their magic.
The salesperson's first question usually starts with 'How much money can you pay a month?' Once they get that range from you, they go back and forth 'crunching' the numbers, then seeing if they can 'talk their manager' into getting you the best deal—all while keeping your monthly payment where you want it. The process can take hours out of your day—and if you're not prepared, thousands of dollars more.
But what exactly happens each time they go behind those closed doors with a manager? What goes on behind the scenes that the dealerships may not transparently explain that allows them to follow through on their promise? Most of the time, the answer is a high-risk auto loan—and when you need credit repair, Dallas, this is a big danger to your financial freedom.
The dealership is there to make money: they want to sell you a car, so they will not word an auto loan for what it is. If you are not prepared, you run the risk of being taken advantage of—especially if you have a lower credit score.
We don't know what we don't know, but once the salesperson gets you back to the finance department to sign your life away, they know they already have you locked in. Before you ever head to a dealership and sign through all that paperwork, there are a few things to consider:
How You Obtain Your Loan Will Have the Biggest Impact on the Interest Rates
- Dealerships may not provide much insight regarding the lenders they are going through to obtain your loan. Their main focus is your monthly payment.
- They want to sell you their car, and they want it sold yesterday—so they sometimes utilize lending networks; third party vendors that may get that initial 'approval' very quickly just to sneak in extra fees at the end.
The result may be that you get the car you want, but you will have a longer term on your loan—and much higher interest rates. A typical auto loan these days can extend as long as six to eight years, well beyond the vehicle's manufacturer warranty.
Not All Lenders Make Offers Based on the Same Credit Score Rating System
If you are not sure where you stand with your credit score, it can cost you thousands of dollars more throughout the loan—even if your monthly payment ends up being reasonable. The gap between auto loan interest rates offered to poor and good credit borrowers can be up to a 15 percentage point difference. This is one arena where credit help, Dallas, can really come to your rescue!
Trading-in Your Old Vehicle? a Down Payment May Be Better
You don't necessarily have to make a down payment or trade-in a vehicle to get approved for a loan, even with poor credit (depending on the right lender). However, a down payment can help to increase your approval chances by reducing your loan-to-value ratio.
Either way, auto loans are secure—which means if you are unable to repay your loan, the bank can repossess your vehicle and then sell it to make up for some of their loss. This would also negatively impact your credit score for any future needs—and if you've already been hurt by this tactic it might be time for credit repair, Dallas!
Should You Get a Cosigner?
If you have a friend or family member that has a higher credit score, you can essentially 'borrow' some of their credit to show lenders that if you are unable to pay the loan, there is a secondary person assuming the responsibility. This could help you finance a larger loan with a lower interest rate but could also impact your credit negatively for any future loans.
Ready to get back on track and secure the right interest rates for an auto loan? Credit Diva of Dallas can help get your credit score to a range that will get you the best rates among lenders in the Dallas area! Let's work together to fix your credit and secure your financial freedom.