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.