Best Auto Financing Practices: Dispelling Common Myths

As this is Finan­cial Lit­er­a­cy Month, auto deal­ers should pay extra atten­tion to issues raised under best auto financ­ing prac­tices to help their cus­tomers feel com­fort­able dur­ing the buy­ing process.

Com­mon vehi­cle financ­ing myths can knock car shop­pers off course. To help con­sumers make informed choic­es, the edu­ca­tion­al coali­tion AWARE (Amer­i­cans Well-informed on Auto­mo­bile Retail­ing Eco­nom­ics) clears up some com­mon vehi­cle financ­ing mis­con­cep­tions.

To that end, the AWARE Coali­tion has put togeth­er infor­ma­tion to clear up 5 com­mon auto financ­ing myths:

MYTH 1: The Annu­al Per­cent­age Rate (APR) on vehi­cle financ­ing can­not be nego­ti­at­ed.

FACT: Cus­tomers usu­al­ly can nego­ti­ate the APR and pay­ment terms, just as they can nego­ti­ate the price of the vehi­cle. The fed­er­al gov­ern­ment has even said, “You may be able to save a lot of mon­ey over the life of the loan by nego­ti­at­ing the inter­est rate.” (Source: CFPB, What is deal­er or deal­er­ship financ­ing?)

MYTH 2: Con­sumers get the best deal when financ­ing a vehi­cle through a cred­it union.

FACT: Cred­it unions, banks and deal­er­ships all offer com­pet­i­tive rates. Car buy­ers should shop around and com­pare rates – and restric­tions – to find the best deal for them.

MYTH 3: Shop­ping around for vehi­cle financ­ing neg­a­tive­ly impacts a consumer’s cred­it score.

FACT: While shop­ping around for vehi­cle financ­ing may cause mul­ti­ple cred­i­tors to request a consumer’s cred­it report, an individual’s cred­it score will not be neg­a­tive­ly affect­ed if the inquiries are made with­in a 14-day peri­od.

MYTH 4: Cred­it insur­ance and extend­ed ser­vice con­tracts are required when financ­ing a vehi­cle.

FACT: Cred­it insur­ance and oth­er ser­vice prod­ucts are OPTIONAL. Con­sumers should learn about the val­ue pro­vid­ed by these prod­ucts and only sign up for the ones that they would like to pur­chase.

MYTH 5: Vehi­cle buy­ers are required to use in-deal­er­ship financ­ing.

FACT: Financ­ing arranged by a deal­er­ship is offered as a con­ve­nience and is OPTIONAL. Con­sumers look­ing to finance a vehi­cle pur­chase should shop around to find the best financ­ing terms that meet their needs.

“Financ­ing is a crit­i­cal part of the car buy­ing expe­ri­ence for many,” said AWARE spokesman Eric Hoff­man. “Con­sumers help them­selves by learn­ing the facts about the process.” Hoff­man urged any­one look­ing to finance a vehi­cle to spend as much time shop­ping for financ­ing as they spend look­ing for the right auto­mo­bile.

AWARE is a vehi­cle financ­ing indus­try coali­tion to help con­sumers under­stand how auto financ­ing works. The group pro­vides poten­tial buy­ers of new and used autos with the tools and resources they need to suc­cess­ful­ly nav­i­gate the auto financ­ing process.

For more infor­ma­tion, con­tact the Amer­i­can Finan­cial Ser­vices Asso­ci­a­tion at their web­site.

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