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Questions to Ask Yourself before Applying for Vehicle Financing

Car Dealers; Auto Sales & Service

Updated on Nov 6, 2014

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The number one thing to remember when considering financing a vehicle is to be prepared. Do not go to a car dealership without having knowledge about financing a vehicle. Salespeople are very experienced in recognizing this and they will use it to their advantage. Here is a list of questions that you must ask before you dive into financing a vehicle. Once you fully understand this basic knowledge of financing a vehicle, bring these questions to the dealership and make sure that the answers are what you are looking for.


1. What is the interest rate that you are paying?

In order to know the interest rate that you are actually paying, you must know the APR. APR is the annual percentage rate, which is the interest rate that you would pay every year on an unpaid balance of the vehicle loan. The rate that you will be provided with at the dealership greatly depends on your individual credit score. Dealerships will get this directly from your credit report.


2. Is there going to be penalties on your loan?

Make sure to ask if there are going to be penalties if you pay your car loan off early and if there are going to be any hidden charges throughout the entire term of your loan. This is very important because you do not want to be surprised with an extra fee or penalty at any time while financing a vehicle.


3. Is there a deposit on financing a vehicle?

You want to make sure that you are going to the dealership with enough money to make a deposit if it is required for financing a vehicle. Before you do this, you want to know if you can get your deposit back if you change your mind about the car or if it is gone forever because usually, the deposits can get pretty pricey. Ask for the salesperson's answer in writing before you give any money to them so that you are not surprised later.


4. What is the exact payment you will be paying for the vehicle every month?

Again, you do not want to be surprised down the road with more money than you thought it was going to be. Make sure you know down to the penny amount of money you are paying for financing your vehicle every single month.


5. What is the total exact amount of money on the finance?

Make sure to know the total amount of money that is being financed to you for the vehicle and the number of payments and months that it is going to take you to pay it off. You do not want to get yourself into something that you are not going to be able to pay the monthly payment each month.


6. Should you buy a service contract?

This decision is completely up to you but always explore all of your options. Read the finance contract and look to see what is covered by warranties and insurance policies. After reading this, consider if it is a good choice to get a service contract. You may want one if the contract only covers things that would not cost too much to begin with. A good deal would be if it covers the little things and if it covers the big things as well that would cost an arm and a leg. Again, this choice is all yours. Decide what best suits your individual needs.


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