AAA Offers Tips to Avoid Auto Finance Pitfalls
7 October 1999
AAA Offers Tips to Avoid Auto Finance Pitfalls
ORLANDO, Fla.--Oct. 7, 1999--After weeks of searching for the perfect car, then negotiating a great price, there is one more hurdle to clear before you can credit yourself with a good deal, according to AAA."Many buyers work hard to get a great price on a car, only to give back much of what they saved in the finance office," said Ed Feder, chief executive officer, AAA Financial Services. "Striking a deal with the salesperson is only half of the process."
Potential car buyers should view the process as three separate transactions: negotiating the best price on the new car, getting the best loan and getting the most money for your trade-in.
AAA offers these suggestions for car buyers to help them obtain the best deal they can negotiate.
| -- | Do your financing homework before you buy. Find out what rates are available for new and used cars by searching the Web, newspaper ads or your bank. Decide how much you can afford, set a limit and stick to it. |
| -- | Focus on getting the lowest possible interest rate, not the monthly payment. Finance managers can juggle a variety of factors to meet your desired monthly payment, but you may pay more for the car over the term of the loan if you don't keep the interest rate down. |
| -- | Know what your trade-in is worth before shopping. Your bank, the Internet or Kelly Blue Book can provide both the retail price and trade-in value. If possible, sell the car yourself. |
| -- | Know what the monthly payment includes before you sign anything. Read the loan papers to make sure that the purchase price, down payment, trade-in value, and interest rate are as you agreed. |
| -- | Auto dealerships can offer a variety of "add-ons" such as an extended warranty, credit life insurance or a security system. Decide whether you want these items prior to choosing a vehicle. For more information on these add-ons, log on to www.financial.aaa.com and click on "Avoiding Auto Finance Pitfalls." |
| -- | Many new car manufacturers offer a choice of customer incentives such as a cash rebate or low-rate financing. Figure out which is the better deal by using the online calculator at www.financial.aaa.com, or the formula in the chart that follows. |
Rebate/Interest Rate Formula ---------------------------- Loan amount $10,000 Divide by 2 $5,000 Multiply by the difference between interest rates x .05 Subtotal $250 Multiply by the number of years in loan term x 4 Subtotal $1,000 Subtract rebate - $1,500 Total - $500 This formula shows a potential buyer whether taking the low rate or the rebate is the best deal. It takes a 4-year, $10,000 loan and compares 3 percent low-rate financing with a $1,500 rebate and 8 percent financing. It assumes the buyer would apply the rebate to the down payment on the vehicle. If the total is positive, a customer will save by taking the low-rate financing. If the total is negative, then taking the rebate is the better deal.
Call 1-800-680-AAA4 to apply for an auto loan through AAA or log on to www.financial.aaa.com.
AAA Financial Services offers a full range of financial products and services through MBNA America, NA, and PNC Bank, FSB, and its affiliates.
AAA news releases can be downloaded from http://www.aaa.com/news
