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Buying a car? Here’s what you need to know

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Today we announced how lenders can take steps to prevent discrimination in auto lending, but there are also steps that every consumer can take to make it more likely that they are getting a good deal on a car loan. If you’re shopping for a car loan, you’re not alone. The average loan for a new car is up to $26,691 – making auto loans an important decision for consumers.

Shop for a car loan before shopping for a car
When you decide to buy a car, there are several options when it comes to getting a loan. You can check with several banks, credit unions, or other lenders to get a pre-approved loan. Get that pre-approval before you go to buy a car and take the pre-approval with you when you go shopping. Having a loan offer in-hand when you shop for the car puts you in a strong position. For most people, concentrating your applications in a short period of time can minimize the effect on your credit score. Any negative effect will be small while the benefits of shopping around could be big.

When comparing loans, make sure you’re comparing all the terms
If you get competing offers from different lenders, including a dealer who offers you financing, you should take a close look at each of the loan terms, including the interest rate, amount financed, and length of the car loan. Some lenders may tell you they can tailor the monthly payments to suit your budget, but that could mean extending the lifetime of the loan. That could mean that you would still owe on the car when you are ready for your next car.

It’s hard for you to know how your interest rate and other loan terms stack up against other consumers in similar situations. Our announcement today is part our effort to protect consumers from unlawful discrimination. You can be a savvy buyer, though, by taking easy steps to negotiate the best deal for yourself – starting by shopping for a car loan before buying the car.

 

  • Steve Adkins

    Where is the option to pay CASH for a car? Why assume that someone must get a loan. Why not recommend that the best option is to pay cash.

    • JT

      Maybe because the majority of people car shopping are financing or obtaining loans and those are the people who need this advise. If you can pay cash for your car then obviously this was not intended for you.

  • Deeply concerned

    From the perspective of a small community lender this is devastating news. Community banks and credit unions believe in fair lending, but we cannot afford to monitor dealerships as this law requires. Sure we can switch to a flat program but the dealers will cut us out of the picture and ship all of the loans to larger banks that can afford the compliance costs to allow rate mark ups by dealers. This law should have been directed at the auto dealers not the financial institutions, which would have had a resulted in a stronger influence and done its part to level the playing field amongst lenders

    Given enough time the CFPB will eliminate all community banks by driving down revenue and driving up operating expenses.

    This is not a victory for the people this is a victory for the big banks.

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