If they sense that you’re a serious buyer, they won’t just let this deal slip away and not follow you out the door! More often than not, they would ask you to take a look at another computation which is better than the initial offer. It’s possible that you may do this step several times until you get what you want or at least something close to what you want, but be patient.

Experts advise that the best time to visit the car dealer is a couple of hours from closing time, preferably during the last few days of the month. The reason? The agents are exhausted toward the end of the day and would very much like to make a deal before the day ends. The same thing goes for monthly quotas. However, never fall for the “on-the-spot-delivery” trap.

Studies show that women are more vulnerable to sales pressure tactics, and because they’re generally less knowledgeable about cars, they’re more often taken advantage of in situations like these than men. Take a male friend or someone who knows cars like the palm of his hand, and get that bias out of the way!

Based on these three simple tips, let’s now see if you can actually save more than just chump change on your car purchase:

Let’s say for example you have your heart set on a $13,000 sedan. If your credit card score is 700 and you select a paying period of 5 years, you’ll be given an APR of about 9%, bringing your monthly amortization to $270. That’s $16,200 in total costs.

Now, if you took the time to improve your credit score a tad to raise it to above 750, then you could just qualify for an APR of about 7%, which reduces your monthly payment to $257, and your total interest to $2,445 – resulting in total costs of $15,420. That’s already a savings of almost $800.

Next, try to reduce the APR even further by looking for an online lender. Your improved credit score rating could get you 5% APR if you’re lucky, bringing the monthly payment down to $245, giving you a total of $1500 in savings from your original figure.

If you could get yourself to negotiate with the sales agent, you could probably still get a $500-$1,000 discount, and if you could pay a thousand dollars or more upfront as down payment, then the dollars saved could well amount to more than $2,000.

Anyway you look at it, two grand is two grand, which you can use to beef up your car or purchase some accessories you deem are necessary. Keep in mind, however, that these savings cannot be realized when you’re in a rush. It pays to study the figures well or to walk away and come back another day if you feel that the deal is disadvantageous to you.

If they sense that you’re a serious buyer, they won’t just let this deal slip away and not follow you out the door! More often than not, they would ask you to take a look at another computation which is better than the initial offer. It’s possible that you may do this step several times until you get what you want or at least something close to what you want, but be patient.

Experts advise that the best time to visit the car dealer is a couple of hours from closing time, preferably during the last few days of the month. The reason? The agents are exhausted toward the end of the day and would very much like to make a deal before the day ends. The same thing goes for monthly quotas. However, never fall for the “on-the-spot-delivery” trap.

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Check your credit score beforehand. The financing packages you’ll qualify for largely depend on your credit score. This is why to get leverage during the bargaining process at the dealership, you have to get hold of your credit report way before you actually shop for a car.

For less than $50, you can get a comprehensive report on all three credit bureaus (Experian, Equifax, and TransUnion). It’s important to get reports from all three as you wouldn’t know which one the lender would be basing the financing scheme on.

You will get the most favorable loan rates if your score falls between 750 and 800, but if your score isn’t high enough, it’s best to defer your purchase for a few months until you can improve your score considerably.

Shop online and use your phone. Knowledge is power, and you can get it for free by surfing the Net. Instead of taking the auto dealer’s word that theirs is the best price in town, listen to him sing a different tune if you walk into the dealership with an Excel list in hand of price quotes from different sellers.

It’s also a good place to look for auto lenders, who offer lower rates than car dealers. Many online auto lenders provide calculators which you can use for free to compute possible rates you can get based on your present credit score.

Once you come across an online lender you feel comfortable with, start filling in an application form and wait for the approval to arrive in the mail. You’ll then receive a check that you can make out to the company or person selling the vehicle. It’s likely that a price range would be specified by the lender, so you must negotiate further with the seller or car dealer if you can. If the sale isn’t consummated, then you can simply get rid of the check.

Haggle. Yes, haggling isn’t only for flea markets. A lot of discounts can be obtained at the dealership if you do your homework well. For those uncomfortable with negotiating, check out the car’s sticker price or MSRP via www.kbb.com, a valuable resource for checking out prices of new and used cars of almost all models and makes. When the sales agent realizes you’re well-informed, he’ll be discouraged from padding the price tag.

Studies show that women are more vulnerable to sales pressure tactics, and because they’re generally less knowledgeable about cars, they’re more often taken advantage of in situations like these than men. Take a male friend or someone who knows cars like the palm of his hand, and get that bias out of the way!

Based on these three simple tips, let’s now see if you can actually save more than just chump change on your car purchase:

Let’s say for example you have your heart set on a $13,000 sedan. If your credit card score is 700 and you select a paying period of 5 years, you’ll be given an APR of about 9%, bringing your monthly amortization to $270. That’s $16,200 in total costs.

Now, if you took the time to improve your credit score a tad to raise it to above 750, then you could just qualify for an APR of about 7%, which reduces your monthly payment to $257, and your total interest to $2,445 – resulting in total costs of $15,420. That’s already a savings of almost $800.

Next, try to reduce the APR even further by looking for an online lender. Your improved credit score rating could get you 5% APR if you’re lucky, bringing the monthly payment down to $245, giving you a total of $1500 in savings from your original figure.

If you could get yourself to negotiate with the sales agent, you could probably still get a $500-$1,000 discount, and if you could pay a thousand dollars or more upfront as down payment, then the dollars saved could well amount to more than $2,000.

Click here to see Part 2: Save Thousands On Your Car Purchase Part 2

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According to the Insurance Information Institute, you could trim down the cost of your comprehensive and collision coverage by up to 30% if you increase your deductible from $200 to $500. When you target a $1,000 deductible, you could save as much as 40% more.

Although getting a higher deductible can save you a lot, you should still make it a point to keep the amount within what you can easily afford.

Know about the discounts

These are money-savers that your insurance agent may or may not tell you about, but could save you a lot in the long run.

-ABS (anti-lock brakes) discounts
-Air bag discounts: Avail of up to 25% discounts for driver-side air bags and 40% for full-front seat air bags)
-Anti-theft system discounts
-Nonsmoker discounts
-Carpooling discounts
-Car model discounts: Based on your vehicle’s ratings for repairability, safety, and claims history, you can avail of minimal discounts; in the same vein, poorly rated vehicles can attract surcharges
-College graduate discounts: Certain coverage types can entitle you to up to 15% discount, but is available only in Arkansas
-Low mileage discounts
-Safe driver discounts: Avail of as much as 15%, and up to 26% if you have been accident-free for 5 years
-Defensive Driving discounts: GEICO, for instance, offers a discount when you successfully complete a defensive driving course.
-Group discounts (e.g., AAA)
-Mature driver discounts
-Military discounts: Servicemen deployed on emergency to Afghanistan or Iraq can avail of as much as 25% discount when qualified; active and retired members of the military can also benefit from 2-15% discounts from certain insurers
-Multiple car policy discounts: Up to 25% can be saved when insuring multiple cars at once with the same company
-Senior-level Federal employee discounts

There are also the little-known discounts for young drivers. For example, there’s the ‘Good Student discount’ for students with a grade average of at least B, and another for a student who goes away to an educational institution more than a hundred miles away but doesn’t have a car. Even after they get their own vehicles, keep your children on your policy to get further discounts.

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It’s important to do your own car insurance shopping because the sales agent is likely to receive a commission from the car insurance company he’s recommending to you, and this added expense would naturally be passed on to you.

Before you get decide on a particular package, though, read about these valuable tips on how to get the best car insurance deal. Some you may already know about, but there are likewise some valuable bits of advice you may not know could save you hundreds of dollars.

Location, location, location

First off, insurance packages offering the same coverage may vary in cost from one state to another. For instance, your car insurance may be assessed with a more than $3,000 premium in New York while the same package could go for about $1,500 in a less urbanized state.

The reason for this is that premium rates are largely affected by the amount and frequency of claims. In rural America, car owners are less likely to submit claims for a stolen car than one living in a crowded city with a higher crime rate. A larger percentage of road accidents also happen in big cities than in smaller towns.

Age does matter

Age can either be a disadvantage or a disadvantage when computing for car insurance premiums. The higher the risk a client has, the higher the premiums he or she has to pay.

Generally, drivers 25 and below and those aged 60 or older pay higher premiums than drivers outside these age ranges. If you list a teenager down, your premiums can even double! But of course, you should always make a full disclosure of details such as these because failure to do so and eventually getting caught may result in a company turning down your claims or refusing to renew your coverage.

Not all companies have a bias against young drivers, though – several are now offering lower premium rates for young but safe drivers. It has been determined that this breed of young drivers make less insurance claims than those in higher age groups specifically because of their inexperience in driving – in short, they have been found to be more cautious. One tip for young drivers to effectively lower premium rates is to include, as a named driver, an older driver to their policy.

Married People Pay Less

Indeed, there is favoritism regarding marital status when it comes to the computation of car insurance premium rates. Based on studies, married people are ‘more responsible’ and thus get involved in fewer accidents and make fewer claims than drivers enjoying single blessedness.

If you change your marital status after you have signed for a plan, don’t forget to inform your insurer. You might be fortunate enough to get a rebate. Now, if you’re unmarried, don’t despair – not all insurance companies subscribe to this idea. This is why it’s important to shop around and compare quotes.

Click here to see Part 2: How To Get The Best Car Insurance Deal Part 2

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What you would primarily use the car for would matter a lot when your premium rates are determined by the insurer. Car use for pleasure costs less.

How have you been driving lately?

You’ll luckily get safe driver discounts if you have a clean track record and are not a traffic ticket collector. Conversely, a past DWI record or involvement in a vehicular accident can make premium rates shoot up, or you may be rejected for renewal altogether.

Insurance coverage

The amount will vary greatly, depending on the items you wish to be included in the coverage. Minimum liability coverage is required, and this is what provides protection from insurance claims coming from damage or injuries to property or persons.

Some states may require liability coverage plus no-fault personal injury protection coverage. You also have the option to get the “uninsured motorist insurance coverage.” It becomes practical as it is used in cases when the at-fault party is uninsured, or when the coverage for bodily injuries is insufficient.

If you choose the more costly comprehensive coverage, it will cover even damage from natural disasters such as floods, hurricanes, and earthquakes; you’ll also be covered in cases of fire, theft, and car damage from falling objects. Ask your insurer about the deductible that goes with comprehensive car insurance.

Another type of coverage that includes a deductible is collision coverage. If you, as car owner, are at fault in a collision, this type of coverage will pay for the physical damages to your vehicle – which means that you’ll be reimbursed for repair or replacement of parts less the deductible amount.

Older cars, such as those that are 5-7 years old, may not be covered with the comprehensive and collision coverage. Towing services can also be done away with if you have an auto club membership offering similar benefits or if the car is under warranty.

Keep in mind that an insurance coverage should protect you from expenses you might not be able to afford in case of accidents, not all expenses. In this light, the amount you pay in premiums should not be too oppressive as your car depreciates every year, too.
When you’re informed about the various types of coverage, you would know those items that you can do without and which deductibles to ask for, and save hundreds of dollars in the process.

Other factors

Some insurance companies even consider gender, credit ratings or whether you smoke or not when computing car insurance premium rates. These factors have been included as a result of several studies on which members of the population are more vulnerable to accidents on the road.

Research quotes from various sources

Apart from determining which type of coverage to get, it would be worth your while to take some time to cull car insurance quotes from various sources. This will help you select the best but most affordable ones, and thanks to technological advances, there isn’t much legwork involved in comparison shopping for car insurance these days.

Check online. Many websites offer car insurance quotes for free, such as www.insurance.com. As you review different competitors, take note of the following items:
-Discounts applicable in your case
-The insurance company’s financial strength ratings, based on evaluations by Standard & Poor’s and/or A.M. Best
-Their consumer complaint ratio, because ‘cheap’ is useless when service is lousy
-Monthly and annual rates for the various types of coverage offered; keep the limits nearly similar to get a more accurate comparison between companies
-Their payment policies, such as penalties involved in case of late payment

Consult independent agents from your neighborhood. You may come across acquaintances who work in the industry and who are willing to give you substantial discounts.

Large insurance companies. These firms employ their own agents and can give you more affordable deals offering the same coverage. Check out direct writers too, such as Amica, AIG, or GEICO.
Insurance deductibles

Click here to see Part 3: How To Get The Best Car Insurance Deal Part 3

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• Lease

Similar to a long-term rental that you work out with the dealer.  You pay a monthly fee to use the car, which you then return or buy when the lease term is over.

• Lease Extension

A car lease is set up for a specific time frame and then the car is returned or purchased.  A lease extension keeps the car in a leased state for a longer period of time.

• Lease-Like Loan

This is a loan that in many respects resembles a leasing agreement.  But many of the lease fees are waved.  When the contract period is over, the vehicle is paid off by the customer or returned to be sold to retire the outstanding balance.

• Manufacturer

The company like Ford, Mazda or Toyota that makes the cars that you buy at the dealership.  Dealerships are generally independent and the manufacturer offers marketing, rebates and financing deals to help the dealers sell cars.

• Mileage Charge

There are mileage limits for each year you lease an auto.  If you exceed those limits, you will pay this charge.

• Monroney Sticker

This is the sticker you see on the window of every car you look at when you are shopping at a dealership.  It is required by the Automobile Information Discloser Act that this sticker reveals all significant statistics about the car including fuel economy, MSRP, the base price and any add ons that will effect that price.  The name for that sticker was derived form the name of a senator from Oklahoma who wrote the law.

• Mop and Glow

A clever term for add on items that don’t improve the value of the car such as sealant for the paint job.

• MSRP

This is the price the manufacturer recommends for the car or the “Manufacturers Suggested Retail Price”.

• Open End Lease

A simplified lease agreement that stipulates that at the end of the lease term, the customer pays whoever difference there is between the book value of the car and the residual amount of value that their particular car retains.

• Rebate

A discount or a part of the sales price that is returned to the customer.  Often set by the manufacturer as a marketing effort.

• Repossession

When a buyer takes out a loan from a dealership and then fails to make the payments, the dealership takes the car back and keeps all payments that have been made.

• Residual Value

An estimate of the value of a car at the end of a lease.  The real market value is taken from the residual value which then dictates the fees that are paid at the end of a lease.

• Rule of 78’s

When a customer pays back their vehicle loan before the full term, this formula helps dealers know how much to refund of the interest and finance charges.

• Title

Like a deed shows you own a house, the title shows you are the legal owner of a new vehicle.  A title is a legal document.

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• Add Ons

When you shop at a dealership for a car, there will be lots of “extras” that they will try to entice you with.  Since these extras are added to the car, the cost of the extras are also added to the price.  Common add ons that people buy would include a sunroof, an upgraded stereo system, tinted windows, rear window wipers, Sirius Radio, On Star or some other kind of GPS system.  Very often, these extras are overpriced compared to having them added by someone other than the dealership.  It’s a way for the dealership to get the price of the car up.

• Amount Due at Lease Signing

While you pay for a lease month to month, there are up front costs to be paid when you set up the car lease including the security deposits, taxes and fees.  These are due when you sign the lease.

• Annual Percentage Rate (APR)

If you take out for a car loan, this is the interest rate you will pay stated as a yearly percentage.

• Acquisition Fee

When you “acquire” a car by lease, you have to pay for the administrative costs like your credit report, verification of your insurance and costs of drawing up the lease documents.  These costs are charged to you as one fee.

• Asking Price

The price on the sticker.  The advertised price.  Usually you can negotiate this down.

• Blue Book

A book that is the bible of what cars are worth.  Otherwise known as the Kelly Blue Book.  This price is the “book value” of the car.

• CARFAX Document

An essential history document that tells you everything about the vehicle’s past including who owned it and what accidents it has be in.  You need the VIN number to order the report.  (See part 2)

• Certificate of Title

The definitive document showing who owns the car.

• Closed End Lease

This is sometimes called a “walk away” type of lease because under this kind of contract, the borrower can bring the car back when the lease term is up and only pay some fees.  There is more risk to the dealership so this kind of lease is not as common as an open-ended lease.

• Dealer

This is the car lot or the professional who sells or leases cars as their primary type of business. What do you expect from the car dealer when you have bad credit?

• Dealer Hold Back

This is a fancy term for the mark up the manufacturer lets the dealers sell their cars for.  It is their profit margin, which is usually in the two percent range of the cars MSRP (See part 2)

• Dealer Incentives

“Perks” manufacturers use to encourage dealers to sell their cars.  Necessary because often dealers can sell a variety of makes and models so these incentives “buy favor” for certain manufacturers when the care salesman meets the public.

• Dealer Invoice

This is what the dealer paid for the car from the manufacturer.  Sometimes this amount is lowered through rebates and other sales incentives.

• Dealer Prep

If the dealer puts these charges on your invoice, they are for getting the car ready to sell by cleaning it and doing any repairs.  For a new car, you should never see dealer prep.

Click here to see Part 2: Auto Loan Lingo A-Z Part 2

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Insurance companies are not just being nosey.  There are scientific studies that show that in general there is a connection between strong or weak credit and the possibility you will file a claim on your insurance.  If you have good credit, the implication is you know how to manage your affairs which means you are probably a better driver than if you are not as good managing your credit.

Also, insurance companies speculate that if you have a bad credit, you may have a lot of stress in your life, which may impact your driving skills.  To you and I, this seems like a goofy connection.  But whether we like it or not, it is a variable that car insurance companies take seriously.

Improving Your Risk Score

Knowledge is power, as they say so just knowing this information may help you in how you approach your insurance picture.  If you have poor credit at the moment, this may be a bad time to switch insurance companies.  But the real answer is to improve your credit score, which will make your auto insurance picture much brighter.  Some factors you can work on right away are…

• Pay your bills on time. Naturally, insurance companies get nervous if you have a bad payment history because they want their premiums paid on time.  By building a history of making your payments on time, you improve your profile with your auto insurance company.

• Reduce the number of open credit accounts. Debt consolidation can help with this plan.  Your credit situation looks worse if you owe money to a lot of credit institutions.

• Length of credit history. How long you have been a good customer of various credit institutions can help your score.  Of course, you cannot affect that immediately.  But you can limit how much you apply to new credit sources and keep your credit uses confined to the credit accounts you have.  That is healthy credit activity in the eyes of the credit bureaus.

• New accounts. Any recent activity that you generated opening new accounts could cause your insurance rate score to dip.  By being careful how many new accounts you apply for, you do your credit score a favor.

• Account balances. So pay down your accounts but keep them open and active.  That looks good on your credit history, which eventually looks good even to your car insurance company.

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The Auto Insurance Industry

The truth is that studies in how insurance is calculated actually reflect that almost all car insurance agencies use your credit information.  Your credit data is factored into something called your “insurance risk score“.  This score helps insurance planners predict statistically if you are one of the customers that would be most likely to put in a claim in their insurance policy.  This, of course, is what they don’t want.  The insurance risk score helps them decide whether to insure you at all.

The good news is the number of insurance companies that use the insurance risk score to figure your monthly premium payment is not as large.  But your credit information does have a significant impact on how much your car insurance company is willing to work with you.  While some states have laws that keep insurance companies from abusing the use of credit information, it is still quite common for even your current car insurance company to review your credit picture when it is time to calculate your premium.

Your Insurance Risk Scores

The entire process gets started when the car insurance company you are applying to gets permission from you to check your credit score.  FCRA regulations require them to get your approval and its best to grant it because if you don’t, they may not insure you at all.  Then the insurance company pulls your credit information the way other financial institutions do and that data is calculated into your insurance risk score.

If you check your credit history often, you will notice this inquiry but it won’t negatively impact your credit.  Insurance companies use a method similar to how your credit score is derived to figure your credit score.  Of course, you can always keep an eye on your credit score by requesting a free credit report from any of the three major credit agencies who must give it to you free twice a year.  If you are getting hassled by a car insurance agency, check your score.  It could be that if your credit score is below 650, you are considered a risk, which makes auto insurance companies less likely to want you for a customer.

Click here to see Part 2: Car Insurance and Your Credit Part 2

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-Shop around for lending institutions on your own, prior to visiting the car dealership. You can set a mental budget and request for quotes so that you’re armed with figures with which you can compare those quoted by the dealer. Generally, credit unions offer lower rates than banks. You’ll also be given less confusing computations than those hurriedly made for in-house financing.

-The sticker price is almost always negotiable. If no rebates are offered, you can bargain for a discount some other way. On the other hand, be wary of manipulations regarding the number of payments or the total cost of credit offered if a rebate is freely given to you. It may be that the discounted amount would only be added somewhere else.

-Don’t leave everything to the auto dealer. If you’re amenable to the terms offered by them, get the name and contact information of the bank agent arranging your loan so you can always contact them directly. In addition, always check if there is a substantial balloon payment at the end of the loan life.

-There are times when auto dealers would search for your credit reports without your prior authorization. The Fair Credit Reporting Act makes it illegal for car dealerships to obtain credit reports without your written consent. There are car dealers who pull credit reports without the buyer’s consent to:

a) get a hold of your credit card balance (which can be accessed thru credit reports) which they use to suggest to you to use your credit card in order to come up with a larger initial payment. Make it a point, then, not to give away sensitive personal information such as your Social Security number, phone number, and date of birth before you have the payment terms down pat;
b) compute for the rates that a lending institution is likely to give you, based on your credit reports; thus giving them the upper hand in negotiating rates with you; and
c) get as much information from you as possible so that they’ll get leverage during negotiations for the purchase;
d) check out your previous car loans and utilize these figures as a baseline on which to pile on additional payment months or cash during your negotiations.

-After you have decided on which car to purchase, call your bank or the credit union you’ve previously talked to and ask for a quote. Don’t let impatience get to you. Remember – you can save hundreds, if not thousands, of dollars if you wait and study figures meticulously.

-Say no to on-the-spot deliveries, no matter how tempting it may seem. If you give in to this, you won’t be able to read the fine print, and are putting yourself in a situation where it would be more difficult for you to back out of a shady deal.

-Check the contract for a binding arbitration clause which serves to protect the auto dealer from future litigations. Because of the numerous lawsuits that several auto dealers have had to answer to, this clause has been included in many contracts to help dealerships avoid expensive court judgments and instead avail of the services of an arbitration company. Moreover, when you agree to this clause, you are in effect waiving your right to appeal any decision by the arbitration company, which is usually chosen by the dealership.

-Watch out for the devious practice of jamming a loan package. This happens when the sales agent or the car dealership manager comes up with an inflated estimate for a certain loan, providing a margin for throwing in certain items – such as service contracts, credit insurance, and even packages for environmental protection. You are then led to believe that these items are free, when in fact you end up being overcharged for these noncompulsory items.

-Be aware of the Truth in Lending Act (TILA) which serves to protect consumers, including those looking to buy automobiles. This Act requires dealers to present the financing terms in an easy-to-understand and standardized format, making it easier to compare quotes from various lending institutions and discouraging dealers from including figures that are disadvantageous to the client.

The lender must, at all times, disclose the following information for every loan:
-the lender’s identity
-amount to be financed, or total cost of the loan package
-yearly percentage rate, including variable-rate disclosures when applicable
-breakdown of the amount for financing
-finance charges
-schedule of payments
-penalties and other conditions
-the following, when applicable: a) required deposit; b) insurance; c) security interest; d) total cost; e) reference to the contract

You are protected in that if the lender violates any of the terms of the Act, you are given one year during which you can sue and recover lawyer’s fees, court costs, and twice the computed finance charges (between $100 and $1,000). On the other hand, the creditor is given two months from the time of the discovery of the slip-up to rectify any errors made, and is not liable for bona fide errors or honest mistakes.

It is wise, in any case to be informed of your rights and to study beforehand various aspects of car financing in order to get the best and safest financing plan for your new car.

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