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Getting behind the wheel: what you need to know about vehicle financing

Ebony, Oct, 2004

IT'S your favorite color. The perfect fit. It's the car you've been dreaming of for years. But is it available for your dream price?

Should you buy or lease?

What rate can you get?

The answer to these questions, and others, according to financial experts, should already be answered before you get to the showroom floor.

"Before financing or leasing a vehicle, make sure you have enough income to cover your monthly living expenses," according to a report by the Federal Trade Commission. "Saving money for a down payment or trading in a vehicle can reduce the amount you need to finance, [and] in some cases, your trade-in vehicle will take care of the down payment on your vehicle."

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Preparing yourself before you get to the showroom floor puts consumers in the driver's seat long before they've made a purchase, say some financial experts. When you know the process, the facts, and how the system works, you can make the best decision. "Unfortunately, a lot of people who go to dealerships are intimidated because they don't understand the car-purchasing experience and the vehicle-financing experience," says Don Ferguson, director of advertising and relationship marketing for GMAC. "But we believe that an informed customer is our most valuable customer. We want to inform customers before they reach the dealership and arm them with the information to find the car that meets their needs and their means."

"Your Pathway To Financing," a four-hour vehicle-financing educational course, provides consumers with information on budgeting, credit and credit repair, purchase options and product choices. The course can also be taken online at www.yourpathwaytovehiclefinancing.com and is offered across the country in churches, schools, libraries and other consumer-oriented forums.

"The course is designed to cultivate a smarter, more affluent car buyer who will feel more encouraged and confident when buying a vehicle," Ferguson says of the groundbreaking course.

Lynette McCray, the 27-year-old director of Career Makers in Chicago, says that a vehicle-financing course would have helped her during the purchase of her first car. "I'd recently graduated from college and had a lot of student loan debt reflected on my credit report, so I had a lot of credit issues. I was somewhat overwhelmed with all of the choices, the options and the prices," she says." There was so much information on warranties, rebates, costs, rates, financing and leasing. I wish I'd known more before I went to the showroom. I probably would have gotten a better deal."

Rita Richardson agrees. "People, women especially, need to be knowledgeable of what financing is and isn't. We need to be familiar with all aspects of the financing process," says Richardson whose husband, the Rev. Dr. Richard Richardson, assisted her during the car-buying process. "It's only confusing if you're not aware."

Making consumers aware, regardless of the brand of car they purchase, is our goal, says Don Ferguson. "Our purpose is to educate customers about new and used car buying, irrespective of what make or model they choose." But despite the wealth of information through sources like General Motors and GMAC, many customers are still uninformed about financing, leasing, buying and the importance of a solid credit history.

Desmond Roberts, president of Advantage Chevrolet in Hodgkins, Illinois, the only minority-owned Chevy dealership in the state, says that customers often underestimate the impact of credit." A number of prospective car buyers underestimate the importance of paying, even the smallest bills, on time. Many customers are shocked to see the impact that their paying habits have had on their credit scores, and resulting histories." Unfortunately, bad credit translates into higher rates and higher automobile insurance premiums.

These credit concerns, according to vehicle-financing experts, are not exclusive to African-American customers. "If you have bad credit, then it doesn't matter if you're Black or White or blue or green," says Ferguson. "You're going to pay a higher rate. Finance companies look at the risk associated with loaning you money."

Whether you decide on direct lending (a loan directly from a finance company, bank or credit union to you) or dealership financing (a loan secured by a third party bank, finance company or other via the dealership), you are subject to an annual percentage rate, which may be negotiable.

The next step, selecting the purchase option, is determined by your individual needs and usage of the car. If you plan to drive the car for 10 years or more and plan to drive more than 15,000 miles per year, buying may be a more doable, long-term option. Alternatively, if you enjoy driving a new car every two or three years and are more interested in a short-term relationship, then leasing may be the best option.

Getting behind the wheel: what you need to know about vehicle financing

Ebony, Oct, 2004

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