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What types of auto lender are there?
There are a range of options available to you when searching for an auto lender. Banks, credit unions, car dealers, car manufacturers and auto loan specialists can all help you to finance your automobile purchases. But what pitfalls should you look for when approaching each type of auto lender to help you with your auto loan financing? We reveal all below….
Dealers or car manufacturers
This is stepping into dangerous ground unless you are fully prepared. Dealers are fully prepared to be haggled down on the price of the vehicle you choose. They know they can sting you in the tail by using their sales patter to convince you to finance your auto either through the car manufacturers lending subsidiary or an auto lender that they have built a relationship with. We have all heard “You can have this car for as little as $199 a month”, but are they telling you the interest rate of the loan and the term of the auto loan? What you will probably find is that they are hiding their inflated interest rates and long loan term by using this sales trick.
That is not to say that some captive lenders do not offer great deals on auto loans for as low as 0%. You just need to make sure that this is a genuine offer and that you actually qualify for it! Be prepared to be strong when you venture onto the forecourt. Come armed with comparables from other auto lenders to make sure you are not fooled.
Banks and credit unions
Traditionally banks have had stringent credit criteria when it comes to being an auto lender. However, they are now finding it increasingly hard to compete with captive auto lenders and have relaxed their acceptance criteria as a result. Although this means they are putting themselves at an increasing risk of defaulters and bad debtors, they have to do this if they want to remain to be a source of car loans. They may still have higher interest rates than other auto lenders.
However, you could find that your current lender will offer you a preferential car loan interest rate as they want to build a portfolio of business with you.
You should also approach credit unions as they tend to have favorable interest rates too.
Auto loan specialists
Another type of auto lender is an auto loan specialist. As they have experience in the marketplace they will be able to provide you with an excellent auto loan product with a good interest rate. Either search the high street for this type of auto lender or go online as many of them have fully functional internet sites where you can determine what car loan you will qualify for and what your monthly payments will be.
Watch out for the unscrupulous ones though as there can be some sites that will try and trick you, just the same as a captive auto lender would. Take recommendations from friends or colleagues, or look on line for company credentials and past consumer experiences.