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How to get your credit score before applying for a loan. Financing your car should be a forethought, not an afterthought! How to increase your chances on getting approval on a car loan. Tips for auto refinancing to lower your interest rates on your current car loan. Review car loan sites Up2Drive with APR lower than dealers. How to get a get a bad credit auto loan when you keep getting rejected. myAutoLoan.com Free spreadsheet tools to a buyer's offer and car dealer cost, plan your budget, and our 4 way car payment calculator tool. How to lower your current car loan payments: car refinancing tips If you got suckered into a high APR car loan, or even got a decent rate on your current car loan, you can refinance your car loan down to a lower rate and save. Many lenders like Up2Drive are offering popular auto refinancing loans. They pay off your current car loan, and now you pay them back at your new lower APR rate. Read our chapter Auto refinancing tips & scams to avoid, which covers how to lower the APR on your current car loan and auto refinance for people with bad credit. You do not need an appraisal to refinance your car loan. If you are going car shopping, get your credit report instantly online right now so you'll have it, and apply for car loans online now so you'll know now whether you are qualified. Click here to calculate your car loan payment. Why you should consider online car loans: Getting the lowest APR Your best benefits of online car loan companies is you don't have to pay application fees, or down payments. Your speedy car loan approval takes just minutes, and you get online access to your loan account. You just can't beat that. Once you have your online auto financing quotes from sites such as Up2Drive, compare that to the dealer's financing so you have a basis to negotiate your best car loan interest rate. The online sites usually have a lower interest rate than dealers, so online car financing rates are the standard that the dealers must beat. Know Your Car Before You Go Shopping! This is the most important intelligence gathering part of your quest for the best deal on a new car. Visit several internet sites and familiarize yourself with the car you want to buy, as well as the options available. I'll provide you with reviews of the car pricing sites in the next chapter and how to calculate the TRUE dealer's cost of that car (hint: it's not invoice price like most people erroneously think). See our spreadsheet tools further down. We'll also review sites like who list for you the MSRP pricing of cars, as well as dealer invoice pricing, and any known factory to dealer incentives, or factory to consumer rebates. Print out all the MSRP pricing, the dealer invoice pricing, and new car rebates information. Then you'll use this info to calculate your buyers offer to the car dealer using our Buyers Offer Spreadsheet which becomes the standard that all quotes you receive need to beat. Bring all these items with you in "The Folder" as you shop. Best New Car Loan, Used Car Loan Sites Where to check online auto loan rates Up2Drive (a division of BMW Bank of North America) offers highly competitive rates and superior customer service. Up2Drive financing is not available to first time car buyers. Once approved, Up2Drive will send you a "Drive CheckTM". The Drive CheckTM works similar to a personal check and can be used for Private Party Purchase, Refinance or Dealer New/Used car purchases. You can negotiate the sale price of a vehicle as if you have cash on hand. Check today's online auto loan rates Lock your rate for 30 days. Never an application fee. Click here to calculate your car loan payment Click Here to Visit Up2Drive myAutoLoan.com - Offers qualified applicants up to 4 online loan offers in minutes to help you maximize your car loan savings. Fast, free and easy online application Private, secure and Confidential Create your secure myAutoLoan.com account & login Complete private, secure, confidential myAutoLoan.com online application and "SUBMIT" You will receive up to 4 loan offers in minutes Review your offers, compare & select the best offer for you. No fees or obligations! Near instant loan decisions Click Here to Visit myAutoLoan.com

How to get bad credit auto loans

If your Credit Score is < 600 don't submit loan applications that keep getting rejected, dropping your credit score even further. Apply to myAutoLoan.com, they have a wide array of lenders for people with various credit backgrounds. They get you new car financing from high risk lenders, with decent online auto loan rates, even with a bankruptcy. If your score is > 550, no bad credit for 6 months, myAutoLoan.com can help you establish credit with lower online auto loan rates than dealers. If you had bad credit in the past, but now you make more money, you'll find you are cash rich, and credit poor. Then a bad credit auto loan might be your only hope.

Don't fall in to the Gap!

If you owe more on your car than it is worth or if you lease, you should get gap insurance to protect you. Let's say you owe $20,000 on your car, but it's only worth $16,000, you're upside down. You total the car or it's stolen, your insurance company gives you $16,000.You must still come up with $4000 to pay off the bank, plus your $500 deductible! Gap insurance protects you against this. The better ones cover up to $500 of your deductible.

You Have The Right To Know
When you buy a car you have the right to know how much it will cost including interest rate, trade-in value, taxes, and fees, all disclosed in writing. But there are people who don't want you to know how much you're spending, and divert your attention from higher costs by pointing to monthly payments you are comfortable with. Don't get comfortable yet, you're about to learn how to protect your rights.

Don't Be Fooled By Lower Monthly Payments!
When shopping for your auto loan, don't look at monthly payments. Some dealers quote a lower monthly payment than your bank, but the dealer's loan is 39 months, and your bank's loan is 36 months. Don't fall for this scam! Some dealers lie, telling you it's 7%, but plug their numbers into a calculator, it turns out to be higher. Always check their numbers, compare apples with apples! If you can't check their numbers, you have no business doing a car loan!

"Subject To Financing..."
This clause appears buyers orders that we sign for a car. It means the deal is not done yet, even you think you are signing a contract. Then 2 weeks later the dealer calls you up and says "your car loan fell through." Why is that? They ran your credit report, right? They knew what you would qualify for. This is a common loan scam. You should not buy a car first then worry about financing. You don't do it with a house, so why do it with a car? When you buy a house, you MUST have your home loan in order first, so have your car loan in order before you shop for cars. Previously your only car financing options were your bank, credit union, or the car dealer loans. With sites such as Up2Drive. I helped my friend apply online, and they sent him his bank draft the next day.

A common scam in the finance office
Dealers slip in a $300-$900 fee for VIN# window etching, saying that you won't get the loan without it, "the bank requires it". You can order the same do it yourself kit used by car dealers online for only $19.95. Some dealers may tell you the VIN etch was free, yet they still padded your monthly payment with the fee.

Sources of Financing
The easiest way to get pre approved for an auto loan is a credit union or a trustworthy online auto loan sites such as Up2Drive. Before you enter a dealership you must have your financial ducks in a row. You've already been pre-approved by the car financing sites, now compare that to the dealer's APR. Usually the online auto loan sites offer you lower APR than banks. If the dealer can beat your APR, with no cash flow shell games then finance through the dealer, otherwise use the online car loans. Banks charge 2% more for used car loans, than new car loans, so don't be alarmed when you apply for a used car loan.

Your Deposits And Down Payment
Never pay cash for a deposit on a car. If the deal goes south, at some dealers, but not all, you'll never get your cash back, but you can always dispute a credit transaction. You may need a new, clean credit card to handle deposits, and purchases, don't pay cash. What if you can't get credit at all and keep getting rejected? Then try this Credit Card Finder For People With Bad Credit. Don't keep applying to credit cards, get rejected, and your credit history ruined further, find out who will approve you before you apply. They find at least 2 credit cards guaranteed to issue an unsecured credit card to you. If your credit is so bad and If you're in too deep, maybe now is not the time to buy a car. But don't take on more debt with a consolidation loan.

What A Low Credit Score Means To You
Your credit score is the most important factor determining if you'll get approved for a car loan, and what your APR will be. If your score is low, you'll pay extremely high interest rates on a car loan, up to 23%. If your score is below 750, you can forget about getting that elusive 0% car financing we hear about once in a while. Are you aware your credit score affects how much you'll pay for car insurance rates? Maintaining your credit score should be an ongoing process, not a task you rush into when buying a new car. In fact, that's the worst time. The reason is banks will reject you if you have disputed items on your credit report, until it resolves. It can take 60 days to clean up your credit score, so don't apply for any credit until all disputes are resolved and you verified your FICO Score. You have been warned! I have seen people get rejected for applying while closing accounts. Right now, you should be asking yourself "How good is my credit score?"

Credit score myths: "I've never missed a payment. My credit score must be high!"
This could not be more wrong. Many people get upset when they get their credit score and find out just how low their credit score is. Sure paying on time is one of the best things for your FICO score, but it's only one of over 100 variables making up your credit score. Having many open accounts does just as much damage to your credit score, as there is potential for you to run up your credit limit on all your accounts. People with good credit tend to have too much credit, and too many old accounts that they no longer use. Lenders view that as a risk. When I got my score it was ok, but needed improving by closing half a dozen computer store and department store cards which I no longer use, but they were dragging down my score.

The car dealer credit score scam.
This one happens all the time. One guy emailed me to say his score was 780 from 3 credit bureaus. He negotiated the deal, filled out the paperwork including a credit application. Four people came out of the finance office with concerned looks on their faces. They had a piece of paper that said credit score on it with the number 580 circled in red. They stated they could get him financed at 10.9% but not at the special interest rate. When asked how they calculated that score and where they received it from they just mumbled but and said he would get financed at 10.9%. The customer pulled out his credit reports and asked them why they were different from theirs. Three out of the four scattered immediately, the last guy lied and stated that credit agencies like to give better credit scores to consumers than to business that actually lend money. He just started laughing and got up and left, bought another car elsewhere at the low advertised APR.

Car dealer financing is just another product that the dealer sells you. Is it a loan or not a loan?
Quite often the "car loan" you're applying for at the dealer is not really a car loan. They are known in the car business as Retail Installment Sales Contracts, or RISCs. (what an appropriate acronym). The dealer signs the RISC with you, then sells it to a bank, or other lender. Sometimes they participate in the interest rate, so the higher APR they can charge you, the more money they make. In the past, we had no choice, we had to finance at the dealer. But many people don't realize that car dealer financing is just another product that the dealer sells you. You don't have to buy their product just because it's convenient. Convenient usually means higher APR. Unless there is a subsidized low APR from the manufacturer, you'll almost always find lower interest rates and no scams whatsoever from Up2Drive, your credit union, or your local bank. Now you have automobile loan web sites with banks that bid for your car loan, with APR much lower than car dealers. Don't fall for dealer 2% APR advertisements. You must have squeaky clean perfect credit, not one late payment, in order to get 2% financing at car dealers. Very few people can get that deal. Subject to financing...

A high credit score does not guarantee your car loan approval
Lenders verify if you have had an auto loan before. If not, even with a high credit score, you may end up paying a higher APR, or you can get rejected. You can have a high score and if your current debt load is high, they might reject you.

How to increase your chances on getting approval on a car loan

• If you're a recent college grad, don't apply until you're at your new job at least 6 months.
• Don't apply if you have moved in the last 6 months. Lenders verify address and income.
• A previous car loan or home mortgage on your record helps.
• Pay off your credit card balances as low as possible.
• Have a reasonably stable occupation like engineer, architect, finance, etc. No self employment.
• Other examples of credit extended to you should appear on your credit report.
• Don't apply for a car loan for at least 3 years after a bankruptcy.
• Don't keep a high debt load or credit card balances.
• No charge off's on your credit report.

Credit card companies say it takes 60 days for a change (such as paying off your credit cards) to show up on your credit report/score, but who wants to wait 2 months before buying a car? One of our visitors file a request for investigation of her report stating that the balances on these cards were incorrect, and the investigator looks up your correct balances and changes it. She checked 2 weeks later and it was changed. Also, by paying off 2 credit cards from 70% max credit level down to 0%, increased her credit score 100 points. That's the difference between paying 6% APR for a car loan, and 21%.

These are the steps to take before you apply for a car loan:

• Get your Credit Score and put it into The Folder so dealers can't lie to you about your score.
• Close old accounts (but not your oldest one, that helps your score). Old credit accounts are excess luggage dragging down your credit score.
• Remove erroneous previous addresses and other errors off your credit report.
• Try to get any "Charge Offs" removed by negotiating with your creditors.
• Wait until your score goes up to 680 if you're applying for a prime car loan.

Beware Of The Straw Purchase! Don't do a co-sign!
I've received several complaints about this. A straw purchase usually refers to handgun sales. When one person buys a handgun for a person who is ineligible to own one, it's called a straw purchase, carrying stiff penalties. Your car dealer tells you that you can't qualify for the loan and you need to bring in a co-signer, plus they tell you that it will help build your credit. No problem, Grandma will sign for you. But Grandma is easily duped during the car loan signing process. Two weeks later you find out that the dealer did not process a co-sign loan, they made the entire loan in Grandma's name! This does not help your credit. Her name is on the title, and it's illegal for you to buy insurance on a car that is not titled to you. Other legalities are vague, and I hear some states like Texas have laws against Straw Purchases on cars.

How To Avoid The Straw Purchase Scam:
Have both signers present at closing at the same time, also, your contract should have both signatures on the same contract, never sign separate contracts. A notice to the cosigner is required by the Federal Trade Commission's Trade Regulation Rule on Credit Practices. The cosigner should ask for a copy of that after they sign it. This is why I keep telling you, get your car financing anywhere but the dealer.

Benefits Of Auto Financing online:
Dealers don't finance your car loan, they get a piece of the action from a bank. The higher APR they charge you, the more profit they'll make. Here's the benefits of getting your car loan from an online lender:

• Usually you pay lower APR to online lenders than you would at the dealer.
• Approvals are usually within an hour during business hours.
• You don't pay hidden fees, points, or prepayment penalties.
• Online lenders FedEx your check the next day after approval.
• When you buy the car, just give them a bank draft from your online lender.
• Less chance of the dealer calling you up later to tell you the financing fell through.
• You usually have 60 days to use the check, the APR is locked.

Where and when you buy is up to you. They may check your credit, so be sure to get your credit report, and be sure it's correct. With your financing done, there's no need to endure the confusion and trickery of car dealer financing. With the check draft in hand, you have eliminated one of the shells in the cash flow shell game.

Be sure to get your credit score!
In early 2001 it became possible for you to get your own Beacon FICO credit scores when you get your credit report from online sites. Previously lenders kept this secret from you and would not tell you, so they could play games. Make sure you get your credit score so that anyone who runs your report cannot lie and say your score was low and charge you higher APR. This happens all the time, and now you have the power to stop it.

Try your own bank:
If you still prefer medieval banking, go down to your bank, sign in, wait for an hour to see someone, and ask how much you qualify for and get their current APR. Ask them if they match other bank rates. Usually in the Sunday or Monday business section in the newspaper they publish a table comparing all sorts of consumer car loan rates from banks in your city. Usually the bank rates are higher than the internet auto loan sites, that's why I recommend the internet sites first. Don't waste your time going to a bank and risk the humiliation of rejection without knowing what's on your credit report.

Credit Unions:
If you're a corporate employee, school district, government agency, college, etc., you probably have a credit union. Credit unions are easier on you than banks, they'll lend you more money at favorable rates, usually 2% better, but not as good as the car loan sites. Your credit union can approve you over the phone in minutes, printing your credit report during the call. They'll tell you what you qualify for.

Remember, get a copy of your credit report so there's no surprises. They can deduct payments from your pay check if you desire. Credit unions also give more favorable benefits than leasing companies. Most don't require a security deposit, down payment, other fees, and are generous with mileage. If you use a credit union, make sure there is no fine print that says they can put a lien on your home if you default on the car loan. The Postal Service credit union has this lien.

Family:
Your family is a good source of financing for automobiles. Wouldn't you rather pay the bank of Mom instead of a bank? The only problem is that it does not establish credit for you, or re-establish bad credit. If you are looking to establish credit, just use family money as a 20% down payment and finance the auto loan in your name.

Equity In Your Home Can Fund Your "Car Loan":
If you have equity in your home, you can take out a home equity loan for down payments. Try for one with no fees. You can usually deduct interest from home equity loans from your taxes, effectively making your APR even lower! Don't borrow more than the house is worth. Banks will lend you 80% of the equity in your home. Forget those junk mail "checks" you get saying they'll lend you "up to" $80,000 based on the equity in your home. Home equity loans are usually 2% or higher APR than car loans.

Car Financing At The Dealer:
This should be your last resort. Dealers provide car financing from local banks or subsidized financing from the car maker, and charge higher interest than banks or credit unions. If you see 2% financing at a dealer, the factory is subsidizing the reduction in APR to make it more affordable for you. The problem is the dealer usually charges MSRP. If you finance at the dealer, NEVER take delivery of the car until you have the payment coupon book. This way they can't call you up a week later and say you did not get the financing, and jack up your payments. Using sites web sites such as Up2Drive avoids all those scams.

Lease Calculators:
Read our guide on using ALG Residual Values. You'll need it to calculate your auto lease payments, and look up dealer cost for cars and trucks. Every person leasing autos should use the same type of tools that dealers use. Without it you're sailing the ocean of confusion, and they'll swallow you whole. I would never lease a car without using lease software. We like to use Expert Lease Pro because it's so simple. Choose your car from the menu. It lists the dealer invoice cost and MSRP for the base model and options. Check off the options and it supplies you with invoice and MSRP pricing. Look up the residual value for your vehicle using Expert Lease Pro's built-in residual values. Fight fire with fire.

Get The Credit You Deserve
Going to a dealer without knowing what's on your credit report is about the most stupid thing a human being can do. Before entering a dealer you must get a copy of your credit report. Many people are scared because they don't know what's on their credit report or how it will affect their chances for car financing. You also want to make sure that they list your latest salary increase. Dealers know that almost everyone has a bad mark on their report, and they make good use of it when they find it. You get an erroneous notice from a credit card or bank saying "we never got your check". You call them up, find out it's their mistake, no problem. But many people are shocked to find out this error made it onto their credit report! This is why you must get your credit report BEFORE the dealer does.

• My friend found 3 errors on his that kept him from getting a car loan until they were fixed.
• My sister moved and the electric company never sent her last month's bill. Unaware it was due, she got a late fee charge off on her credit report that kept her from getting a credit card. We worked to clear her credit report and she got approved.
• Car dealers use errors on your credit report to charge you higher interest!

What's on your credit report
Some sites give you your credit report free, but you must sign up to their credit monitoring service to get it. You are allowed one free copy of your credit report by a creditor who rejects you, otherwise it's $7.95 from most sites. Your credit report appears online, and shows who has checked your credit history too. You'll see many inquiries with no credit issued and this hurts your chances of qualifying. You must have all these unauthorized inquiries removed from your credit report, especially from car dealers who checked your credit while you were out on a test drive. Usually credit bureaus want to know your address, previous address, SS#, employer, the usual, to get your credit report. Many errors can be quickly removed with a phone call to your creditor. You MUST have a copy of your credit report if you've never seen it before. Show up at a dealer before obtaining your credit report, and you are in big trouble. You might as well just give them your checkbook. A car dealer should never know more about your finances than you do, and besides, you might find an error in your report. This puts you at a disadvantage when the dealer calls 2 weeks after the sale to say "financing fell through, we need more cash", and they blame some black mark on your credit history.

TIP: When filling out the forms for your credit report or anything else online, remember to enter your full email address properly! If your email address is user@aol.com, don't just put "user", you must add the full "user@aol.com", or your request will be denied. They need to be able to email your report to you as a backup. Also, have your drivers license handy, you need the DL#.

People With Bad Credit Or No Credit
How does bad credit hurt you? Dealers charge you 18% interest or more, while the rest of us enjoy 2% to 8%. Bad credit keeps you from opening a checking account! Banks run a credit check because they know people with bad credit bounce checks. The fact that you shafted all of your creditors is coming back to get you. Most cases of bad debt are from pure ignorance. Don't live beyond your means! Plan your life with a budget that has a reasonable and sustainable car payment built into it. If you have bad credit, please don't email me asking what to do, I am not a credit consultant. Go check out the free consumer credit info site DebtWizards.Com instead.

Restoring Your Credit
There's only one way to restore your tainted credit: Pay back what you owe. If you have credit card balances, transfer them to your lowest APR card. Pay off debt before you buy a new car, high balances hurt your chances of qualifying. Stop spending. Pay more to cards with high APR, send more than the minimum payment, or it will take 10 years to pay it off. If you have cash in the bank earning 2%, it's losing you more to income taxes, so be smart and use it to pay off 18% debt. If you have equity in your home, consider a home equity loan to pay off credit cards, close the accounts, and write off the interest on your taxes.

The Proper Way To Consolidate Your Debt
Consolidation loans are not for everyone and can be dangerous if you aren't careful. There's a lot of stupid people out there who aren't paying attention when they consolidate their loans. Sometimes the interest rate can be higher than the rate you currently have on your debt. If the loan's APR is higher than your credit cards, you'll lose money and should not close on the loan.

You Cannot Borrow Your Way Out of Debt!
Consolidation loans are DANGEROUS for impulsive people because all you are really doing is shifting all your debt from one place to another, effectively OPENING ANOTHER CHANNEL OF CREDIT, while freeing up your credit cards. Some idiots then proceed to fill up their credit cards again, now they have double the debt they started with, and they are paying up to 22% on their consolidation loan because they weren't paying attention to the APR when they signed up. Some Loan companies are real unscrupulous and make it look like they are eliminating your debt, or they hide the APR from you.

Responsible Use Of Credit Cards
Use the card to buy gas or food, and pay it off in full each month to establish a pattern of responsibility. You can't get blood from a stone and the moral of the story is to not get into these situations to begin with. The way to build solid credit is to pay your credit bills on time. So how do people with bad credit get into these situations? By not taking their financial pulse and making a budget. You must have a budget and stick to it. People with bad credit think they have no power to negotiate. That's just how some salesman want you to think. Dealers charge them full MSRP. These poor folks, low on self esteem, are often prey to psychological conditioning by salesmen and fear rejection on a car loan.

First Time Buyers And College Students with bad credit:
They have no established credit and fear they'll be rejected. Salesman program them by telling them "you'll probably be rejected". They tell you this is a good chance for you to establish credit, but it does not mean you have to pay a high APR. If you are a student working at the university, you may be able to get a loan through the credit union. Try there first, it's a great place for you to establish credit. Some students have their parents just buy the car for cash. This does not establish credit for you. You might be better off having them put down 20%, then you carry the remaining loan balance. Having a credit card under your parents' name does not establish credit for you. Pay down some of your debts and work on cleaning up your credit score before applying for a car loan. Read and understand how the credit card operates.

First Time Buyer Programs
Many dealerships have first time buyer programs or graduating college senior programs subsidized by the car manufacturer. Some dealers may claim they have a first time buyer program, when there really is not one and they are just charging you 18% APR. If you have a good credit card history, there is no reason to pay 18%. They are feeding off your lack of knowledge and fear of rejection. As a first time buyer you have all the negotiating rights that I do, and don't let any salesman tell you otherwise. Don't fall for their first time buyer 0 down ads either. You must put 20% down on a car, or you'll be upside down on your loan. Also, first time buyers get caught up in the euphoria of buying a new car, and because they are naive, are easily persuaded by salespeople to buy all the extras, or even pay full MSRP. Welcome to life in the real world.

First Things First
Before you even think about going to shop for a new car, do you know how much you can afford? I mean do you really know? If you don't have a budget, then you don't know how much car you can afford and you should not be buying yet. You should have an Excel spreadsheet with your income and expenses clearly and accurately represented, including your car payments. If you don't know how much money you owe your creditors, you have a credit problem.

Our Free Download Car Buying Spreadsheet Tools These are the tools you should be using to get the best deal on your new car Buyer's Offer Spreadsheet Our best tool helping you calculate a buyer's offer to a car dealer. Used by our most successful visitors, the core strategy of our CarBuyingTips.com site is this spreadsheet and The Folder! It calculates TRUE dealer cost (it's not invoice price) using new car pricing, rebates, holdback data you get from FightingChance.com. Fill in the base model price, installed options, invoice pricing, MSRP pricing, new car rebates, destination charges, etc. This tool strips out junk fees, determines dealer's true cost, and offers 3% - 5% fair profit above that. This is NOT for used cars. Read Our Tips On Pricing A Used Car Here. Download The Buyer's Offer Offer Spreadsheet

4 Way Car Loan Scenario Spreadsheet This spreadsheet is one of the best ones I've ever created. It compares 4 different car loan scenarios at once, giving you an at a glance summary. Can't decide whether to take the rebate or the low interest rate? Want to increase the number of months in the loan or play what if games with the down payment? This spreadsheet is just the tool for you. Download The 4 Scenario Loan Spreadsheet

Budget Spreadsheet I created this Budget Excel spreadsheet for you so all you have to do is enter your bills, and the car payment you would like to have, and it will tell you if you'll end up saving money at the end of the month. Choose a car loan payment that allows you to have a positive net cash flow at the bottom line. Download Budget Spreadsheet

Create your budget using the budget spreadsheet
Your budget keeps you from spending too much. Creating your budget is half the battle, you have to adhere to it! With a budget you won't find yourself like thousands of other people 2 months later, realizing you can't afford the payments. Fill this spreadsheet out and you'll have a good "at a glance summary" of your current cash flow situation on one page. Businesses do this so should you. The spreadsheet also calculates how much you can afford to borrow for your new car, based on number of months, and interest rate. Don't go car shopping until you've created your budget, accounting for ALL credit card payments, lunch money, alimony, taxes, HOA dues, gasoline, insurance, property tax, electric, food, water, entertainment, etc. Most schools don't teach kids what credit is or how it works so you have one generation of ignorance teaching the next. This article should be taught in high school and college business classes.

You'll see this repeated: Don't get upside down on a car loan. And don't go car buying if you are upside down on your current loan, just grin and bear it. Many people start off with their first car in college, getting suckered by "zero down first time buyer" loans and they are upside-down on the loan. Then, some get impulsive and want out of their loan or lease to buy the next car that blows their dress up. Some dealers take advantage of this, now they are further upside down, and the uneducated don't even realize it if their payments are lower, and they have a 60 month loan instead of 36 months, because they focused on low monthly payments. They think they are saving money with lower payments, but they are sinking deeper in debt. While their payments are less, there are more payments. My theory is these people will NEVER break free, as debt just overtakes them.

Should You Borrow For: 36, 48, 60 or 72 Months?
That's the tough part. Never sign up to a car loan longer than 48 months. Sure cars are getting outrageously expensive, so the dealers have made 60 and 72 month loans, or 5 year leases popular. Buying a new car is a privilege not a right. Really, do you want to be paying interest for 5 or 6 years? The warranty will run out in 3 years, and that's when the trouble starts. You'll still be paying off your car, while racking up expensive repair bills that you can't afford. And if you have kids at that time, now you're really racking up debt. You have to think big picture, projecting into the future of what your lifestyle and spending habits will be. Heed my warning:

If you can't afford to pay off your car in 48 months you can't afford the car!^TM

Ignore sales talk that your lower priced 72 month payments are better. They just want to get the car sold. Pay off your auto loan as quick as you can so you won't be upside down when you trade it in. That might not be possible with the income at your disposal, but at least try. I paid off my last 2 new car purchases in 42 months and 36 months, and it's great to live without car payments.

The following table shows a $20000 car loan at 8%, with monthly payments for 12-72 months. Note how the payments drop if you borrow over a longer period of time, but the interest goes sky high! Borrow $20000 at 8% APR for 72 months, and you'll pay $5248 in interest! This adds $73 more per monthly payment. If you paid this car off in 36 months, you only pay $2562 in interest, saving $37 a month.

Don't think you're saving money just because the monthly payments are lower, you are actually spending more. Your payments are lower, but the loan costs you more. If you buy a car with a 72 month note, then 3 years later decide to trade it in for a new car you'll have little equity built up in the car, because a good chunk of each monthly payment was busy paying off the interest. This can put you at a significant disadvantage during your negotiations. If you decide to sell the car after 36 months, it may be worth less than what you owe on it, then you're in trouble. I recommend loans no greater than 48 months, and 36 is ideal, accounting for emergencies, loss of job, etc. Leave yourself margin. You DO NOT want to trade in a car that you still owe money on.

People with bad credit just don't understand that you can't wave a magic wand and make it go away. If anyone tells you they can "erase" your bad credit history, they are lying and trying to rip you off. There's only 2 things that heal your wounded credit rating: paying off your creditors, or the passing of time. Lot's of time, like 7-10 years. Some dealers may lease to you because they sell the car at MSRP and charge outrageous interest on top of that. People with bad credit actually end up in a worse situation because of this. They'll be upside down on their loans forever.

Tips To Improve Your Credit Rating
The key to stability is living where you can afford the rent, even if it's not up to your standards, so you don't have to move. If you move around you become un-creditworthy.

• Don't move around. Creditors hate nomads. Don't apply unless you've been in one place for at least 6 months.
• Pay more than minimum payments. If you pay the minimum payment every month, it will take years to pay off credit cards, because interest is accruing on the remaining balance.
• Have a verifiable address. Once while living with relatives, I was rejected for a mortgage simply because the creditor was unable to open the phone book and verify my address.
• Don't change jobs frequently. Notice the pattern yet? Creditors like stability.

Little Things Add Up to Big Things
People don't count lunch and snack money, which adds up. If you go out to lunch every day and your entree was $9, add drink, tax, and tip, now you're at $15. If you do this every day, that's $75 a week, $300 a month. Try brown bagging it, and cut down on Starbucks visits and sodas from overpriced vending machines. That's saves $30 a week, $150 a month. Allow $3-$5 for calculating brown bag lunches. Now you're saving $240 a month, almost a lease payment. Do you have cable or satellite TV? That's another $45 a month, scale down the service. Stop moaning that you can't live without cable. Try getting outside and playing tennis or exercising more often, you'll feel better and won't need cable TV. Now you're up to $285 a month savings. See the trend? If you go out to eat or to movies a lot, buy the Entertainment Coupon Book for $30 from your local charity. Use it at restaurants for 50% off, I save $75 on my airfare, and 50% off hotel rooms. You need to stop, take your financial pulse, and institute immediate budget cuts across the board to get your spending down and your savings up. If your bank account is not rising every month, you should not be buying a car! Apply these ideas and it's amazing how much you'll save. Use your cell phone when it's necessary, and keep conversations short. Time is money. If you have bad credit and borrow $15000 for 5 years at 18%, the payments are $380.85, and total interest is $7851! If your rate is 8%, the payment is $304.20, and total interest is $3252. Let's face it if you have bad credit, life's going to stink for you. So work on fixing your credit, then buy an affordable car, and make your payments on time.

Don't Forget Auto Insurance
Don't overlook this important part of car buying, you'll be in for a shock later. Get a quote on the car you want. You'll be surprised how much some new cars cost to insure. Some cars are very difficult to insure. Know your insurance costs before you buy a car, and plan your budget accordingly. My 25 year old friend paid $2400 a year for insurance on his Mustang, and the GT is even much more! That's $200 per month! This is where people make a big mistake, forgetting to include insurance in their budget. If you're buying a car on the hairy edge of what you can afford, insurance payments will drag you under. Insurance payments are part of your monthly cost of ownership. Read up on how to buy insurance, definitions of coverage, and how to avoid scams in our insurance chapter All About Auto Insurance. Auto insurance sites BestCarInsuranceSite, Allstate, GEICO and Progressive Auto Insurance give you free online auto insurance quotes, so be sure to get pricing from them too.

Extended Warranties
As with financing, you must shop for extended warranties before you buy your car so you can compare with the dealer's warranty pricing. For extended an warranty, try Warranty Direct. I Review both of them in detail in the section on How To Buy An Extended Warranty And Avoid Scams. You want to get an online warranty quote before you go to the dealer, so you'll have something to compare the dealer's extended warranty price with. Never show up at a dealer to buy a car without a free quote from an online warranty site.

See if there's a rebate before you go to the dealer!
Humans think that all cars have rebates. The only time you get a rebate on a car, is if it's a slow mover and the manufacturer needs to stimulate sales. You'll never see rebates on hot selling cars, because they don't have to offer one, the car is selling itself. A Lincoln Navigator or a Porsche Boxster will never have one, and I can't remember ever seeing Lexus offer a rebate. Some dealers may try to tell you there is no rebate so they can steal it, when in fact you know there is one. If they can shield the existence of a rebate from the customer, they don't have to pay it. If the manufacturer does not verify there's a rebate, the dealer could claim that there is no rebate when there really is one. This type of ambiguity and dancing around the truth does not brew customer satisfaction, or lead to long term repeat business relationships. If there's a rebate, tell us. If there's no rebate, tell us.

Rebate Tip Of The Month!
If you get a rebate on your car, use that money for a discount online extended warranty. Many are 40% cheaper than car dealers, and you'll still have money left over from your rebate. It's a great windfall for you.

Go To The Next Chapter
Chapter 2: Discount Car Buying & Car Pricing On The Internet

Jump to any chapter. I suggest you read each chapter in order.
Chapter 1 Get your credit report, how to get car loan, scams, online car loans, first time car loans, budget & loan excel spreadsheets, credit repair.	Chapter 2 Reviews of internet discount car buying sites, new car prices, find dealer's invoice cost. Get a new car quote.	Chapter 3 What to bring to a dealership, what to say, how to act, what not to do, what to look for at the dealership, and a glossary of all dealer fees.	Chapter 4 How to read dealer invoices, finding dealer's cost, how much to offer the dealer, buyers offer spreadsheet, examples, trade-ins.
Chapter 5 Negotiating tips, dealer scams & tricks to watch out for, dealing with aggressive salespeople, choosing between rebates or low APR loans.	Chapter 6 Close the deal, avoid needless extras, scams in the business office, extended warranty scams, options, buying warranties online.	Chapter 7 Actual misleading dealer ads, and what to do when you've been ripped off, customer satisfaction surveys, how I bought my Lexus.
CarBuyingTips.com

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