Buying a car – the first step – your credit!

Posted: June 9, 2011 in Uncategorized

AJ Foyt

Before I start my insights into how to finance a car I have to mention one fact. According to biblical principals we are not supposed to borrow money. While this is true, it is also true that cars are a necessity in the USA. It is also true that vehicles have come a long way over the last ten years. Safety and longevity in all the major manufacturers products have made giant strides. So newer cars are safer, and more expensive than ever before. The idea of saving up to buy a car is noble, and Godly, but not very practical today. So the next best thing we can do is to be the best stewards of the blessings bestowed upon us and find a responsible arrangement for a superior product.

So, you want to buy a car. Congratulations! If you prepare correctly you will have a great time and get a terrific vehicle. Most people are more worried about the type of car they want than they are about the actual terms of the sale. This is not the right way to approach getting a new car.

The first thing to consider is what your budget can handle. There are several online budgeting tools that will help you do the pencil work; “bankrate.com” is one that comes to mind that will help you compute how much loan you can afford and how much it will cost. Remember to add the taxes in your area, if applicable, as well as the license fees to get a more accurate idea of how much you can truly afford. I have had hundreds of people come to me over the years thinking they have their payment all figured out, and are aghast when they get their figures because they forgot the taxes. Your department of motor vehicles will get you a ballpark figure, as will any top car salesman. If you can’t find one, write me and I’ll do my best to help.After you have subtracted your rent/mortgage, added all your expenses per month, put away your 10% tithe, and looked at what is left please remember to pay yourself too. Some people have forgotten this important step and ended up living to pay for their car. I do not want anyone to end up this way. Your car payment should not be more than 25% of your total free income after your bills are paid. THIS SHOULD ALSO INCLUDE YOUR INSURANCE PAYMENT! Your free income is all your free money after all your expenses per month.

For the sake of time and to help clear up confusion I’m not going to cover leasing today. That is a horse of a different color! When you have decided what you can afford to pay per month for your car, the next step is to figure out what you can afford for a down payment. This is the easiest way to reduce your monthly payment and increase the caliber of car you can afford! Save a good down payment to earn more car for the money. Your trade in is also part of your down payment and appraising the trade is a subject for another day.

Now you have a good idea of what you will use for a down payment and what you can afford per month for your car. The next thing to research is your credit. Your credit rating is gleaned by looking at your “Isaac Scores” . Your Isaac Scores are at the top of your credit report history and are a number that usually ranges from 500 to 900. The better the rating, the lower the interest you can qualify for. According to new rules going into effect this year, you should be given a copy of your credit report average Isaac Score, see:>  http://www.scoreinfo.org/Disclosure-Notices/Credit-Score-Disclosure-Notice.aspx   <if your Isaac Scores are used by anyone to determine interest rates in your case. If you go to “bankrate.com” you can plug in an interest rate and get a monthly payment, but is your credit good enough to get you the rate you want? That is the question! The next step in your preparation to go shopping is to go by your local bank. There are two reasons for this. First, your bank’s loan officer will go over your credit with you and pre-approve you for a loan. If you have credit problems or small collections on your report, your bank will be happy to help you clear them up. If they are not willing to take the time to help, you need a new bank! The second thing your bank will do is give you an approval for a loan at a specific rate of interest. Please remember that most dealers have their own financing which they will offer at a better rate than the bank, and some also offer special financing for good credit, I.E. zero interest loans. If you don’t want to go to the bank to research your credit rating, you can get a copy of all three credit reporting bureaus for free at   https://www.annualcreditreport.com/cra/index.jsp    < It is always easier to shop knowing you already have a loan at an acceptable rate, and the dealership will be willing to compete for your finance business by beating that rate. So when you go shopping for your car, you always shop for your interest rate too! The best deal is the best car for the best rate, not just the best car.

If you need help or more information write me at trthbymike@yahoo.com or go by truthbymike@yahoo.com.

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Comments
  1. Richard A Sanabria says:

    Very useful, thorough and comprehensive information, on top of that with unselfish interests. Thank you Mr. Fisher

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