Finance that New Ride Right

You've got the new-car itch. You've scoured all the automotive consumer Web sites and armed yourself with plenty of information, including a hard look at things like the "transaction price." You know what color you want and what options you just have to have, and you might even have checked out some dealer sites to get a handle on what is available in your area. Now what?

If you just charge over to a dealer, you're missing a step.  Car-buying experts recommend you research financing options and get pre-approved for an auto loan before you go to the dealership.  Yet many consumers don't heed that valuable advice.  Most consumers thoroughly research vehicles before visiting a dealership, but according to AWARE (Americans Well-Informed on Automobile Retailing Economics), few do the same when it comes to financing vehicles.

"Everyone benefits when consumers understand vehicle financing," said Ford Motor Credit North America President A.J. Wagner. "We depend on repeat business, and so do our dealers. When customers get a fair deal on a great vehicle, they do business with us again."

Consumers should take the following steps, even before visiting the dealership, to get the best deal and make the financing process run smoothly:

1. Review your credit report.
You can get one free credit report from each of the national credit bureaus each year. Visit FactAct or call 877-FACTACT to request yours. Check your report for accuracy and report errors to that credit bureau. Remember that if you have a solid history of on-time payments, you will generally qualify for a better rate than if your payment history is spotty.  This can mean big dollars, so make sure your report is accurate.

2. Develop your budget.
Who wouldn't want to drive a fully loaded luxury car or a tricked-out sport-ute? But make sure your dream ride does not become a monthly payment nightmare. And remember that lenders expect you to carry insurance on your vehicle, so budget for that, too.

3. Shop around for financing.
Financing rates vary.  Not every deal is the same.  So get an idea of current rates and terms by checking with lenders, Web sites and newspaper ads.  And view all this realistically. If you tend to make payments late, have a lot of debt outstanding or have other factors that affect your credit history or capacity to pay, you are unlikely to qualify for the best rate.  This is the time to get pre-qualified for an auto loan from a bank, credit union or on-line loan source.

4. At the dealer ask about special offers and then negotiate.
Now is the time to visit your dealer.  There you can get a quick, convenient way to finance your vehicle, and you will have access to promotions from the vehicle manufacturer. Make sure you ask about special rates or programs such as first-time buyers program and college student programs. Contract rates and terms are usually negotiable, just like the vehicle price and trade-in allowance. But remember that a special promotional rate or cash bonus through the manufacturer may not be negotiable, and if you have a difficult or limited credit history, you may not be able to get the best rates.

5. Read the contract.
Double-check the cost of the vehicle, the trade-in allowance and down payment, the contract rate and terms, and other specifics -- before you sign the contract. Look hard at items like optional "credit insurance" (which makes your car payments if you become disabled or die and can't make them yourself), extended service contracts and guaranteed auto protection (GAP coverage pays the difference between what you owe on your vehicle and what you receive from your insurance company if your vehicle is stolen or totaled.) While you might sense some benefit from these, many financial experts say they are unnecessary and costly add-ons.

Remember, if at any time you don't understand an item, take the time to get it explained to you, to your satisfaction. At the same time, the words on the sales contract, not what the salesperson and finance and insurance person tell you, represent the terms of the deal.

Equipped with this knowledge, and the ability to get up and walk out whenever you feel uncomfortable, you will get yourself a satisfying deal.

Cleveland-based auto journalist Luigi Fraschini has purchased and sold innumerable vehicles without going into bankruptcy.