car financing deal coupleAre you shopping for a car? Whether you are buying a new or used car, there is a good chance that you will be financing the purchase.

Of course, if you can afford to comfortably pay with cash you should consider doing so. But if you don't have the luxury of buying a car with cash, be wary of what the dealer tells you when it comes to financing your purchase.

Car dealers are in the business of making money. This holds true not only for the price of the car, but also for the financing.

Car Financing Tips

Here are several little-known car financing tips that may help you secure a better deal:

1. You do not have to use the bank that the dealer suggests.
Many people walk into a dealership, choose a car, and let the finance department provide the loan. While this appears to make the process easier on the buyer, in the long run you never know for sure if you are getting the best deal. Dealers often have deals with specific banks, which is why they try to push you in a certain direction.

Before you head to the dealer, search for your own financing. For example, speak with the institution that you currently bank with about their auto financing options, compare loan rates online or visit a local credit union. By asking around, you can ensure that you are getting the best financing plan, with the lowest rates.

2. You do not have to use the manufacturer’s lending division.
Many people believe they are required to finance their car at the dealership. Unfortunately, some shady car salesmen and financing “professionals” tell customers that this is a requirement for financing the car.

For example, several years ago I purchased a Honda Accord. Even though the finance department representative said I could use my own lender, he strongly suggested that I go through Honda Financial Services. After comparing my options I found that Honda offered a loan with a 7% interest rate while my local bank offered the same loan at 5%. The decision to go with my local bank was easy.

If a dealer tells you that you are required to use the manufacturer’s bank to finance your car, he or she is lying. It is time to move on to a more honest seller.

3. You can negotiate the rate.
Did you know that car dealers have the ability to “mark up” the interest rate that you are charged on your loan? The difference between the rate offered by the lender and the rate you agree to, if higher, is given back to the dealer.

While this is a way for the dealer to make money on unsuspecting consumers, it is also a way for you to save money. You just spent a lot of time negotiating the price of your car. You might as well continue the negotiating at the financing table. Even if you shave only one percentage point off your loan, negotiating will save you hundreds of dollars (or more) over the life of the loan.

4. Who said you need a down payment? When buying a home, you almost always need a down payment. This is especially true in today’s day and age. Fortunately, the same does not hold true when buying a car. If you don’t have money for a down payment, you can still buy a car. Although this will mean a higher monthly payment, you still have the ability to make a purchase.

Note: Some lenders do require a down payment. If you don’t have the money, shop around until you find a lender that will give you a loan with nothing down, but be sure that you will have no problem making the necessary payments.

5. You don't have to buy, or finance, an extended warranty.
Financing an extended warranty isn't financially responsible, since you will pay interest in addition to the cost of the warranty. However, it can be a good way to get extra coverage without having to spend a lot of upfront money. Make sure that you know the total cost for the extended warranty, plus interest charges, before you purchase this optional coverage. In addition, verify what coverages are included with the manufacturer's warranty before purchasing an extended warranty from a dealership.

When I bought my last car I also purchased an extended warranty. The dealer offered this at a total cost of $1k. I had two options: pay it all upfront or lump it in with my loan. I decided on the latter. Yes, this means that my payment went up by roughly $15/month, but it was better than paying in full at the time of purchase or not having the coverage at all.

Final Word

It is easy to get duped when financing a vehicle purchase. After all, you are excited about the car you are buying and you just put a lot of time into negotiating the price. Although you may think the negotiating has ended by the time you reach the financing department, make sure you follow the five tips above to get the best deal on your car.

These tips can help you secure better financing for your vehicle. Do you have additional tips to share? Tell us how your favorite negotiating tactics worked for you when you purchased your last car.

financial checklistHave you ever created a year-end financial checklist? If not, you are missing the boat! This is something that can improve your financial situation at the present time, while also making life easier in the year to come.

Of course, there are many reasons and excuses for not working on a year-end financial checklist: you don’t have enough time; you don’t have the right information; you don’t know where to start. While you could once again rely on these excuses to bail you out, why not take the initiative this December, and create a year-end checklist that will help better your situation for many months to come?

Here are five things to include on your checklist.

1. An overview of your savings, as well as the progress you have made during the past year
In short, determine how much money you have in the bank at the present time, as well as how much you've saved throughout the year. For example, you may find that you had $10k in savings in January 2010. Now, you have $20k. This means that you saved $10k over a 12 month period. Are you happy with this? Will you be able to do it again next year? Do you want to save more money in 2011?

2. Tax information
It is never too soon to begin preparing for tax season. Even though your return is not due until April 15th, it makes good sense to include the proper information on your year end checklist. This should include how much you paid in taxes, an estimate of the amount still due or the amount of a refund, and any information on deductions and credits. You may not want to believe it, but taxes greatly affect your overall financial situation. It is important that you always know where you stand with the IRS, as well as where you stand with your state and local tax agencies, too.

3. Review your insurance policies
Most importantly, take a close look at your health and life insurance. While doing so, consider how much you pay each month, whether or not you are happy with the coverage, and if any changes are in store for the year to come. Some insurance policies (health insurance) are paid for and used time and time again. Others, such as life insurance, are not for regular use. Instead, you continue to purchase this coverage to protect your family should the unfortunate occur.

4. Did you reach your financial goals for 2010?
As you look back on the year, you will probably find that you reached or exceeded many of your goals. At the same time, you may find that you came up short on quite a few. Even if you failed to reach any of your goals, it is essential that you assess your situation to ensure that this does not happen in 2011. You can learn a lot about your finances by reviewing your goals, and considering your successes and failures.

5. Debt, debt, and more debt
If you are like the average American, you have some sort of debt weighing you down. This can include everything from a mortgage to a car loan to a credit card. How you deal with this debt will have a big impact on your financial future, just as it played a major part in your financial past. It is important to list out all your debt at the end of the year so that you can devise a plan on how to attack it down the line.

Final Word
This statement is echoed by tens of thousands of people every year: "I never have time to make a financial checklist because I am so busy at the end of the year!"

Many years ago, I was one of these people. I never had time, and I continued to let December come and go without looking back at the past year or planning for the future. But guess what? Once I got in the flow of creating a year end checklist, I realized just how much better my financial situation had become.

It only takes a few hours to review the five points listed above, (as well as any others that you find to be important) and dig up all the necessary information. When complete, you will feel much better about your finances as you head into the New Year.

Now that you know what to include on your year-end financial checklist, the last thing left is to get started!

(photo credit: Juggling Frogs)