Back-To-School Should Mean Auto Financing 101 for Students Looking to Purchase a Vehicle

WASHINGTON, Aug. 9, 2006 -- For college and high school students thinking about buying a car or truck for the new school year, a first step should be obtaining an understanding of how the vehicle financing process works, according to AWARE (Americans Well-informed on Automobile Retailing Economics), a national consumer education campaign sponsored by members of the vehicle finance industry.

"For students who choose to finance their first vehicle, AWARE's Web site -- http://www.autofinancing101.org/ -- should be 'required reading,' because it can help make the difference between a purchasing experience that builds upon long-term financial goals versus one that detracts from them," said Eric Hoffman of AWARE.

To help students, and their parents navigate the auto financing landscape, AWARE urges students -- and their parents -- to discuss, and come to an agreement on, the following before buying a car or truck:

  * Know what you can afford:  Determine what type of vehicle best meets
    your needs, set a realistic price range, and develop a comprehensive
    budget for owning and operating your car or truck.

  * Decide how you're going to pay for it: Some first-time car buyers
    purchase a used car or truck with cash they've saved or borrowed from a
    family member.  Others, however, work on their own or with their parents
    to finance a vehicle through a bank, credit union, or at a dealership.

  * Review your credit report:  To know what creditors will see, obtain a
    free copy of your credit report. Plus, this will allow you to correct
    any errors you find.

  * Comparison shop:  The auto financing industry is highly competitive, so
    use the marketplace to your advantage by comparing annual percentage
    rates and other financing terms from multiple sources, such as banks,
    credit unions, and auto dealers.

  * Know Your Stuff:  Make sure you are familiar with common terms you're
    likely to hear or read in the course of purchasing or financing a
    vehicle, such as down payment, fixed- and variable-rate financing, and
    on- and off-site financing.  Many of these terms can be found at
    http://www.autofinancing101.org/resources/glossary.asp.

  * Negotiate:  This finance rate you are offered is negotiable, as well as
    the price of the vehicle.

  * Understand the value and price of optional services:  Examples include
    credit insurance, guaranteed auto protection, and extended service
    contracts.  If you do not want such services, do not sign for them.

  * Read any contract carefully before signing it:  Ask questions about
    anything you do not understand.

  * Make your payments on time:  Late or missed payments incur late fees and
    can even cause your vehicle to be repossessed, permanently.  A bad
    payment record will also appear on your credit report, damaging your
    ability to get credit in the future.

AWARE also stresses the importance of distinguishing between wants and needs. "Students may want satellite radio and a GPS system, but that's often out of financial reach and could very well get a young automobile buyer into economic trouble," he said. "Instead, students should concentrate on financing a safe, reliable car that is economical to operate, repair, and insure. Understanding these differences is the first step to building a strong credit history for the long term."

AWARE was formed to build a greater understanding among consumers about how auto financing works. The group aims to ensure that potential buyers of new and used autos have the tools and resources they need to successfully navigate the auto financing process. AWARE focuses exclusively on educating consumers on vehicle financing in a web environment free of advertising or lead generation sales tactics.

  AWARE's membership includes the following:

  American Financial Services Association
  National Automobile Dealers Association
  National Association of Minority Automobile Dealers
  American International Automobile Dealers Association
  American Honda Finance Corporation
  American Suzuki Financial Services
  AutoNation
  DaimlerChrysler Financial Services Americas
  Ford Motor Credit Company
  GMAC
  Group 1 Automotive, Inc.
  Jaguar Credit
  Land Rover Capital Group
  Lithia Motors
  Mazda American Credit
  National Auto Finance Company
  Nuvell Financial Services Corp.
  Saab Financial Services Corp.
  Sonic Automotive, Inc.
  Toyota Financial Services
  United Auto Group, Inc.
  Volvo Car Finance North America
  Wells Fargo Auto Finance