 |
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| Understanding
Vehicle Financing |
| Before
You Arrive at a Dealership |
| What
Happens When You Apply for Financing? |
| What
Influences Your APR? |
| What
About a Co-Signer? |
| Should
I Lease a Vehicle? |
| Determining
How Much You Can Afford |
| Federal
Laws |
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Determining
How Much You Can Afford
Before financing or leasing a vehicle, be sure
you can afford your current monthly living expenses.
Only finance new purchases when you can confidently
take on a new monthly payment. The “Monthly
Spending Plan” is a helpful tool in determining
affordable payments.
Only consider taking on additional debt when you’re
spending less each month than you take home. Additional
debt load should not cut into the amount you’ve
committed to saving for emergencies and other
top priorities or life goals. Saving money for
a down payment or trading in a vehicle can reduce
the amount you need to finance. In some cases,
your trade-in used pickup
truck, for instance, will take care of
the down payment on your vehicle.
Know the Terms of Financing
Before You Sign
Negotiated Price of the
Vehicle -
The purchase price of the vehicle that the buyer
and dealer have agreed to.
Down Payment -
Money initially paid to reduce the amount financed.
Extended Service Contract
-
Specified mechanical and electrical components
optional protection on the vehicle available for
purchase as a supplement to the warranty.
Credit Insurance -
Optional insurance that pays the unpaid balance
if the buyer dies or scheduled monthly payments
if the buyer becomes disabled.
Guaranteed Auto Protection
(GAP) -
Optional protection that pays the difference between
the amount you owe on your vehicle and the amount
you receive from your insurance company if the
vehicle is stolen or destroyed before the end
of the credit obligation.
Amount Financed -
The dollar amount of the credit.
Annual Percentage Rate or
“APR” -
The cost of credit expressed as a percentage for
the length of one year.
Finance Charge -
The total dollar amount you pay to use credit.
Fixed Rate Financing -
This finance rate remains the same till the contract
ends.
Variable Rate Financing
-
A varying finance rate and the amount you must
pay changes over the life of the contract.
Monthly Payment Amount -
The amount due each month.
Assignee -
The bank, finance company or credit union that
purchases the contract from the dealer.
Getting a Copy of Your Credit
Report
To obtain a copy of your credit report, contact
one of the following credit bureaus:
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Equifax
Credit Information Services P. O. Box 740241 Atlanta,
GA 30374-0241 Phone: (800) 685-1111
Web site: www.equifax.com
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Experian
P. O. Box 2104 Allen,
TX 75013 Phone: (888) 397-3742 Web site: www.experian.com
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TransUnion
Corporation P. O. Box 1000 Chester, PA 19022
Phone: (800) 916-8800
Web site: www.transunion.com |
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| Remember...
Before Visiting the Dealership: |
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- Review
your current financial situation and determine how
much you can and want to pay each month. A longer-term
finance contract may mean smaller monthly payments
than a shorter-term finance contract (if all other
terms are the same) - but will result in more money
paid over time on your contract.
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- Determine
the price range of the new car you’re thinking
of buying. Check newspaper ads, Web Resources, and
even an online auto auction. Read a new car review
on the car of your choice!
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- Understand
the value and cost of optional credit insurance
if you agree to purchase.
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- Learn
what it means to buy and leasing a car.
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- Be
aware that your credit history may affect the finance
rate you will receive. A lower rate should be available
to you if you have good credit.
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- Compare
annual percentage rates and financing terms
from many different finance sources.
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| When Visiting the Dealership: |
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- Keep
to the price range you can afford (decided on prior
to visiting the dealership). Remember to take the
new car invoice price into consideration.
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- Negotiate
finance/lease arrangements and terms.
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- Take
the time to consider carefully whether this purchase
is best for your budget and transportation needs
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- Understand
the value and cost of optional products, if you
agree to purchase. If you don’t want these
optional products, don’t sign for them.
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- Always
read the contract before you sign. Once it is signed,
you are obligated.
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| After
Completing the Vehicle Purchase or Lease: |
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- Be
aware that if you financed, for example, a used
Ford truck, the assignee (bank, finance company
or credit union that purchases the contract) holds
a lien on the title until you contract (the
used truck price) is paid in full.
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- Be
sure to make your payments on time. Late or missed
payments incur late fees and go on your credit report.
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| If
You Encounter Financial Difficulty: |
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- If
you experience difficulties making your monthly
payments, communicate with your creditor. Explain
the situation and the reason your payment will be
late. A repayment schedule may be worked out with
your creditors. If necessary, seek the services
of a non-profit credit counseling agency
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- Know
your obligations. A creditor or assignee may take
the vehicle in full satisfaction of the credit agreement
or may sell the vehicle and apply the proceeds from
the sale to the outstanding balance on the credit
agreement. This second option is more common. If
the vehicle is sold for less than what is owed,
you may be responsible for the difference
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- Repossession
can occur if you fail to make payments in a timely
manner. You will still have to pay for the vehicle
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