Car loan commercials on TV show these special incentives to entice us to go to the nearest dealership. These deals are so tempting they make us want to get that car right away, before the offer expires. It’s easy to get caught up in the excitement with those amazing deals. But we may be way over our heads if we don’t know exactly what these deals are. Before you go to your car dealership, below are brief descriptions of common car loan deals.

Car Loan Incentives

• Recent Graduate Programs. Recent graduate programs are discounts that car manufacturers give to recent graduates. If you graduated within the last two years, you could qualify for the program. What makes this deal so attractive is you could get up to $400 off the price of your car loan. But there are a lot of conditions attached to this deal. Recent graduate programs are usually limited to certain car models and to certain dealerships.

• Factory-To-Consumer Rebates. Factory-to-consumer rebates are direct cash rebates from the car manufacturers themselves. This type of rebate is limited only to a few select models. And these models are usually the ones that are hard to move off the lot. When it comes to this type of rebate, most dealers would try to encourage you to use the rebate as a way to lower the sale price of the car. But it’s much better to take the rebate because your dealer could find ways to add to the sale price so you’ll lose that rebate. It’s best to just take the cash so you have the option to put it in your down payment or not.

• 0% APR. One of the biggest and most attractive car loan deals out there is the zero percent interest. What most people don’t know is that not everyone is qualified for 0% APR. There are certain conditions that have to be met before you could qualify. First, you have to have a credit score of 680 or higher. Second, you have to agree to a shorter loan term (24 to 36 months), which means your monthly payments could get really high. Third, zero-percent financing is limited to a few car models, so you may not get the car that you want if you want this type of financing. And lastly, once you qualify for this type of financing, you can’t get cash rebates.

Before going after these car deals, it’s still best to shop around and look at all the possible car loan terms you can afford. Sometimes, the more traditional car loan with the regular interest rate may end up being cheaper and more manageable in the long run. You have to be critical when it comes to car loan financing. Don’t be easily dazzled by car loan incentives and focus on the goal, which is to get the best auto credit deal for the car that you want.

A car loan from a dealership is quite popular because it’s easy, convenient, and most car salespeople are just so tenacious that it’s hard to say no. Dealerships are determined that you get a car loan from them in order to make the sale and make a profit. Sometimes, they resort to tricks in order to get you to spend more money. They best way you can avoid their money traps is by educating yourself. Once you recognize these traps, you’ll be able to avoid them and have more control over the terms of your car loan.

Here are some of the common car loan traps that dealerships use to get more of your hard earned money.

Common Car Loan Traps

• Asking for your credit report even when you’re paying cash. In our current financial climate, cash is king. You can get the best deal anywhere if you can pay for your car in cash. Any dealership should sell you a car even without your credit score especially if you’re paying in cash. Asking for your credit report is just an excuse for them to look into your credit score in order to convince you to finance a car loan with them. It’s also risky for you because every time you check your credit score, it can actually make it decrease. So don’t let the dealership bully you into sharing your credit report.
• Not calculating the total financed amount correctly. Some car dealers will intentionally leave out rebates, trade-in, and the down payment on the sale price of your car in order to get more money from you. Make sure to that they apply these to your bill; check and double check to make sure you’re getting a fair deal.
• Additional Dealer Mark-ups (ADM). Additional dealer mark-ups are things such as dealer preps, rust proofing, or undercoating that they automatically factor in the sale price of your car. None of these things are required and you can have them taken out of the final price of your car. Dealers just preprint these in your form hoping you wouldn’t notice and that you’ll pay them without question. If you see these mark-ups on your car loan form, you can demand that they reprint a new form without it. It’s your right and you’re entitled to it.
• Spot Delivery. Spot delivery is one of the most underhand things dealers do to squeeze more cash out of you. What happens is that they take advantage of your excitement and send you home with your car without signing the final contract for your car loan. Then they’ll call you to renegotiate on a different contract. You wouldn’t be able to fight it because you weren’t able to finalize the contract before you took the car. The dealer could demand a higher down payment, or increase your monthly payment and interest rates. Always make sure you understand every detail of your contract, and that you sign and finalize everything before driving off with your car.

Getting auto credit if you have a bad credit record is easier now than it was five years ago. Bad auto credit allows people with bad credit record to take out manageable car loans. A lot of people shy away from bad auto credit because they often don’t get good deals with bad car loans and they’re worried that it would reflect badly on their credit history.

But do you know that applying for a car loan is actually a good place to start improving your credit score? Bad auto credits are not as bad as they sound. If you pay your car loan promptly and regularly, you’ll see an improvement on your credit score faster and it’ll be easier to improve your once you’ve paid off your loan.

Bad Auto Credit Gives Good Credit

We all know that the first step in improving your credit score is by paying off all your credit card debt. But we all know that this has little effect on your credit score. And even if you’ve paid off all your credit cards and you’re completely debt free, you’ll still have a hard time getting credit due to your bad credit score.

Let’s say you’ve finally managed your finances and you happen to need a car, the only type of credit you’ll probably get is a bad auto credit. Bad auto credit, despite the name, can actually help your credit score. That’s because bad auto credit limits your options only to cars you can afford. It sets out loan terms that are realistic enough for you to keep to.

In order to make bad auto credit work for you, first you have to shop around. Find out which auto credit can give you the best deal. Then you can work out the terms of your car loan. Be realistic. Figure out what kind of car you really need and what you can afford. Set payment terms that you can meet even in a worst case scenario. Make sure you can afford your monthly payments, and still be able to pay your other bills and essential purchases like food and clothing.

Nothing improves a bad credit history better than a good payment record. Since you have auto credit that you can afford, there should be nothing stopping you from paying on time until your loan is completely paid. Once you’ve established a good payment record, you may even be able to renegotiate your loan terms to make it easier for you. They may lower your interest or your monthly payment.

Once your car loan is paid, you should see your credit score improve. From there, it’ll be easier to get other loans or get a credit card to help further raise your credit score. As you can see, bad auto credit is actually good credit that can help you get rid of your bad credit.

Auto credit lenders now require people with bad credit to come up with a down payment before they can get a car loan. Even if you have good credit, putting in a down payment for your car loan is actually a good idea. Down payment for auto credit can be paid in cash or real equity in your trade in. The amount of equity required for a down payment is usually 10% of the car’s value of $1000, whichever is cheaper.

Most people see the down payment as an unnecessary step or added red tape to getting a car loan. But instead of looking at a down payment for auto credit as a nuisance, think of it as the first step to completing your car loan. When you come up with a down payment, it actually makes getting a car loan easier in the long run.

Auto Credit Benefits Of Placing A Down Payment

• Having your down payment prepared actually increases your chances of getting a car loan. If you have bad credit or if you’re a first-time buyer, it would be really difficult to have your auto credit approved. It’s because of your bad history or no history from which they could base their decision to approve your loan. But if you have your down payment ready even before applying for a car loan, lenders would be more willing to approve your car loan. Lenders see a down payment as a sign of your commitment in completing your loan. They know that you’re more likely to pay your loan if you’ve already invested a substantial amount of money.

• Having a down payment could reduce the length of your loan term. A down payment takes a huge chunk out of your car loan. The larger the down payment, the greater the amount reduced from your loan. Once you start making your monthly payment, you’ll see that you only have to pay the remaining balance.

• A down payment can actually lower your monthly payments.  Having the largest down payment that you can afford reduces the amount you have to pay for your loan. Instead of reducing the length of your loan term, you could opt to keep the loan term but have your monthly payments reduced. When you divide it by the number of months you have in your loan agreement with the amount you have left to pay, you’ll end up with lower monthly payments.

• A down payment reduces the amount of interest you have to pay for your auto credit. Again, this is about trust. Lenders are more willing to give lower interest rates to people they trust. It’s easier to refinance your loan when the lender trusts you. Your interest also goes down because with a down payment, it’s easier to pay off your car loan faster.