Scammers often take advantage of your enthusiasm to close the deal of a lifetime on a new car, without you stopping to think about its legitimacy. There is a little red flags to watch and avoid without getting ripped off.
Red flag: the lender asks for an upfront payment.
A legitimate car lender will never ask you to pay an upfront fee or request another form of payment in order to top up your loan. These schemes usually all play out the same – you send money and never see it or hear from the lender again.
Red Flag: Dealers with Secured Loan Approval.
Although technically legal in some states, advertising for secured loan approval (also known as secured credit approval) is misleading and can be a trap. These types of dealers like to approve you for a loan with onerous terms, like forcing you to buy a high mileage junk car or only approving you for a very high APR or large down payment.
Red Flag: Departure of the lot without loan approval.
Perhaps the worst auto scam is the yo-yo finance scam. While most dealerships can arrange competitive financing on the spot, some may call you days or weeks later to tell you that your loan terms have changed and your APR is much higher than you originally had. agreed. You can avoid this by obtaining your financing from a trusted financial institution before purchasing a car.
Here are some tips for finding the best loan for you:
Know your credit score.
âThis is one of the main factors that lenders use to determine the interest rate to offer you,â said Joe Pendergast, vice president of consumer loans at Federal Navy Credit Union.
Here is a big graphic who shows you what type of APR to expect based on your current credit score. Or, if you find that you need to improve your score, you may decide to wait until you get a better rate before financing a vehicle. Knowledge is definitely the power when it comes to auto finance.
âOne of the best ways to make sure you find a car that fits your budget is to get pre-approved,â Pendergast added. “Pre-approval also gives you more bargaining power at the dealership because for the dealership it’s the same as paying cash for the vehicle.”
Evaluate your financing options.
Having options allows you to compare interest rates and loan terms, so you can make the best decision.
âWhen you know up front how much you’re approved, you’ll be less likely at the dealership to buy a vehicle outside of your financial comfort zone,â Pendergast said.
A military-focused financial institution like Navy Federal is a great place to get financing for a vehicle. Their five-step pre-approval process makes it easy to determine how much you can afford. They also have tons of Resources, especially if you’re a first-time car buyer, to help you easily navigate the financing and buying process.
When it comes to auto loans, some research and some tactical patience can keep you from being scammed and getting the best deal to manage your finances.
The Navy Federal Credit Union is insured at the federal level by the NCUA.
This article is sponsored by Federal Navy Credit Union.