![]() It is especially important to try delaying the purchase of your next car if you’re upside-down on the loan for your current car, multiple experts say. Here’s more advice on the best way to get car financing and avoid the problems that Roundtree encountered. While not everyone has free or low-cost legal help available, McClary says organizations like the NFCC are available to provide assistance. But by then it’s too late to take any action, especially when the dealer’s charges are not prohibited by law, as long as all the charges and the full cost of financing are disclosed in the finance agreement.”Īlthough Roundtree got another loan and kept her new car, it might not have ended up that way if she hadn’t asked for assistance from her union’s legal services department. “After signing the contract and driving the car off the lot, some of our members then go over the signed contract and believe they were overcharged. "I think a lot of people in this country need to improve their financial literacy,” she says. And she suspects the problem is widespread. ![]() She says that it’s fairly common for her clients to walk into a dealership financing office with little understanding of the far reaching impacts the sales contract can have. ![]() They don’t care if you can make the payments.”Ĭarrie Miller, an attorney in the consumer, debt, bankruptcy unit of the District Council 37 Municipal Employees Legal Services, represented Roundtree. Once you sign the financing paperwork and buy the car, they’re not tied to your ability to pay for it. “They are highly incentivized to make a sale. “A dealer isn’t the person to tell you whether you can or can’t afford a vehicle-they focus on monthly payments, not on overall affordability, or the length of the loan,” says Bruce McClary, senior vice president of communications at the nonprofit National Foundation for Credit Counseling (NFCC). But again, be careful, and always be ready to walk away if a deal doesn’t seem right. You might not end up using it, but financial institutions are usually better equipped to work within your budget.Īt the very least, preapproval will give you a baseline from which to work before you set foot in the dealership, and you may be able to use the bank financing to negotiate even better terms with the dealer. Some dealers may try to mislead you by advertising that they will pay off your car loan, which is rarely ever the truth.”Įxperts from CR and elsewhere say it’s always a good strategy to arrange financing with your bank or credit union before you go car shopping. “The contract should detail how any negative equity is being handled. “Make sure your contract clearly outlines your new loan amount, the loan term, interest rate, monthly payment, and other terms discussed verbally in negotiation discussions,” says Jon Salzberg, director of Credit Karma, an organization that helps car buyers get a credit score and keep track of their personal auto financing. Experts also urge extreme caution when rolling the balance of an old loan into a new one, saying that if you aren’t careful, the new amount you owe can be worth more than your car-a condition known as having negative equity, or being “upside-down.” That’s why it’s important to read both the sales and financing paperwork carefully, or even get expert advice before you sign anything. Although dealers sometimes offer better financing terms than banks and other financial institutions, their contracts can be confusing, and carry conditions that can cause problems later on. Roundtree eventually got another loan and was able to keep the Acura, but her problem understanding the complexities of the sales and financing contracts is shared by many car buyers.
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