Renewal Financial Services, LLC

Getting the car you want during tough credit and economic times

With banks tightening credit, automakers experiencing sales declines like not seen before, gasoline prices collapsing because of diminished demand and unemployment and recession woes, buying a car in today’s market may be a little bit tricky. It you desire to purchase a car, there are four (4) things to consider when deciding to make this important purchase.

Thing No. 1: Look everywhere to find a deal

As mentioned above, car dealers experienced a 37% decline in sales in November 2008. Dealers are prepared to make exceptional deals to get the existing inventory off their lots and meet their budgets or risk having to send the cars back to the dealer. Because budget-conscious consumers are hesitant to purchase big-ticket items in this economic climate (a car is second only to a home in terms of household spending), those who can buy a car are likely to reap extraordinary benefits.

If you are interested and able to purchase a car in this market, look around for the deal the meets your budget and family needs. The first thing that you should do is identify the car and features you want. A little research to get the wholesale and retail prices will help you along the way. The Kelley Blue Book or Edmunds can be an invaluable resource.

Second, you should pay close attention to incentives and deals offered by dealers in your market. If you don’t get what you want in terms of price, APR and your other demands, shop around to get what you want. If the dealer down the street isn’t willing to meet your demands, they should be aware that the one in the next county or state will. When they know that you’ve done your research and are willing to travel to get what you want, they will make the best deal possible.

Thing No. 2: I know your credit score may not be exceptional, but act as if it is 720 anyway.

Examine your credit. If it is less than stellar, identify and correct any errors are on your report. If the blemishes are accurate, take steps to repair them yourself. Go to the Renewal Addressing Credit Errors coach to learn how. Finance companies have tightened their lending standards and are making fewer loans than they were making six months ago. They are reluctant to lend to anyone with a credit score that is less than 720, which is the ‘new’ subprime.

After you’ve addressed your credit issues but find that your score is still less than 720, negotiate the deal first and get a firm price, list of incentives and everything possible before allowing the dealer to take an application, if you decide to finance your car through the dealer. The better option is to get your financing before you enter the dealership. This will give you a significant negotiating chip. If you have a relationship with a bank or a credit union to provide financing, on your terms, do this first. If you have neither a relationship with a bank or credit union and cannot get traditional financing from a finance company, you may be required to come up with 10% to 20% of the cost of the vehicle to get the terms and conditions you desire.

Obviously, if your credit score is above 720, you are in a much better bargaining position. With this credit score, you can reasonably demand additional incentives from the dealer. Unfortunately, more than half of all Americans have credit scores that are less than 720 and as a result, finding a buyer who meets the stringent requirements demanded by finance companies is increasingly attractive. You are among the elite and you should act like it.

Thing No. 3. Don’t consider leasing.

Once upon a time, a consumer with decent credit could lease a new expensive car for two years at affordable terms. Now is not that time. Unfortunately, the credit crisis has all but wiped out this option.

You may remember your wise uncle telling you that your car loses a significant amount of its value when you drive it off the lot. He was right. As a result, this option is less attractive for finance companies that have a profit motive in mind. As a result, you may want to take this option off the table as a potential consideration for getting the car you want.

Thing No. 4: Pay close attention to what is happening with major car companies.

General Motors, the stalwart of American car companies, faced almost certain bankruptcy but for the infusion of significant sums of money from the federal government. Chrysler and Ford, the remaining American car manufacturers, were in less dire shape than GM, but were in bad shape nonetheless. These three companies are not out of the woods by any stretch of the imagination and must be monitored consistently.

What will happen if these three companies go out of business? Will you be able to get the parts and repairs you need? These are critical questions that must be answered before you decide to purchase any of these brands. This blog is not meant to demean or diminish the importance of the domestic brands, but this is an important consideration when deciding which car to purchase. You are less likely to purchase any product if you are unsure of your ability to get it fixed if something should go wrong. Therefore, when deciding which car to purchase, take this important fact into consideration.

Dr. Rickie Keys directs Renewalfinancial.com’s financial education programs. Sign up for his free monthly e-Newsletter at www.renewalfinancial.com/signup.

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Getting the car you want during tough credit and economic times

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