What is a reasonable Finance Charge to pay for a vehicle that is priced at $13k?

Question

I am looking to purchase a 2006 Jeep Cherokee, but I want to get a good estimate that is realistic and reasonable for the finance charges etc that I will be charged when I go to sign for the vehicle. I have already been through the motions for it once and they wanted to start me off at $379/month payments for 5 years. That totals to almost the same amount as the vehicle in finance charges alone. Even though this is my first car bought at a dealership what is an expected/reasonable finance charge to settle for?

Answer 1

The finance charges are entirelye dependent on your credit strength.  If you have good credit, you can get a fairly low APR, and thus lower your interest and your payments.

I typically advise people to get preapproved for a loan, before shopping,  Use an online source such as lendingtree.com, eloan.com, capitalone.com or drivetime.com.  Drive and Capital One will lend on just about any credit strata.  I suggest lendingtree first, becuase they can get you shopped to hundreds of lenders at once.

You may also want to go to your local bank or credit union and get pre-qualified for a loan.  Credit unions usually have better rates.

Once the loan is in hand, you are free to concentrate on the actual price of the car.  INstead of thinking about monthly payments, you can work on the top-line price of the  car.  Thanks to that pre-approval, you will already know that if you spend X your payments will be Y.  Now you can work the price of the car to get the best possible deal.

One last thing.  When  you go to the dealer, tell them up front that you have a pre-approved loan.  Tell them the rates and term as well.  The dealer will offer to meet or beat your financing.  If they can, then let them - everyone wins.  If not, then you already know you have the best possible financing arrangement