What are some good pointers in regard to financing terms?

It depends on a lot of different factors. The most common terms are probably 48 and 60 months. Obviously, the longer the term, the higher the interest will cost you(for the total term, not necessarily rate), if you pay the car for the whole term. In my opinion, if you're looking at a pretty low mileage car, and you're fairly certain you're keeping it for a while, going 60 months isn't necessarily a bad thing. If you're buying a higher mileage car, you want a shorter term. Just don't get a loan term that you think is longer than how long the car will be pretty reliable. You can still keep a low payment, and a pretty short term(36mo) on a car if it's not too expensive($5-8K).

For one, when you're shopping for a car, do NOT tell the salesman you are looking for a certain payment. Focus on the price point of the car...get a good deal on the car, and before going in, get a feel for what different price ranges will cost a month for different terms. You can find payment calculators online.

Make sure there isn't a prepayment penalty in your state. In MA, it's illegal to do so. That means, if you have a 60 month term, and your payment is $250 a month, you're allowed pay extra every month, and/or you can pay the loan off before 60 months, and there's no fees for doing so. One advantage to that is, let's say you know you can comfortably afford X amount...one month maybe you've got some extra money, you can throw it towards the car. That extra money goes to principal.

As far as interest, I don't think you can be too picky in your situation. With limited or no credit, the rate will most likely be in the teens. Think of it as the price of building credit...and getting a car loan really does build your credit if you pay it on time.

My advice with this, is before going to the dealer(if that's who you buy a car from), try to get a loan on your own. Call some local credit unions and banks, and ask if they do any first time buyer programs, or give car loans for those with limited credit. Your job history(length of time at job and income) are big factors here. Most big banks(ex. Chase) who are "direct lenders" don't usually participate in these programs. You'll probably find a loan with a subprime lender(ex. Capital One, Americredit). Of course, if you have a good cosigner, you can get a better rate, and a loan with a direct lender. I know peoplefirst.com directs applications with less than perfect credit to their subprime department, so you might want to check these out to. If you DO get your own loan, then you can tell the dealer you got X rate, and let them see if they can beat it.

One advantage to using the dealer for financing is, they have more connections, experience, and know-how on getting you a loan, so you might have to end up going through them. We used non-public banks that specialized in no or bad credit, so I got customers financed who could have never done it on their own. Be forewarned, they'll most likely charge you a "bank fee" along with other fees...usually they're not negotiable, but you can try.

Good luck, and let me know if you have any more questions with this.

Oh yea, and in MA, most banks that specialized in peoples with no credit, their stipulations were:

-1 year on job
-I think around minimum of $1600-1800/monthly verifiable income. You have to provide current paystub, and possibly your '03 tax forms.

That's the range I've been looking at. The lower the car's price the shorter I'd go.



I presume this is to avoid having them try to sell me on the basis of a monthly payment?



He he, I put a few online. What they indicate to me is that I should go for 5-8K and 36 months to be comfortable. In other countries 36 months is considered long so I was wondering.



Hmm thanks! I didn't consider that there might be a penalty for this.



Teens? Ouch! The online calculators conveniently forgot to tell me this. I'ma goan beat one up right now.

Thanks, I thought that 36 months was too long but if there are people out there doing 60 I don't feel as bad.

Cool, that's really useful info!

Yes, 36 is a pretty short term, but typical in that price range.
And yes, you don't want someone selling you on a payment. That's how a lot of people get whacked doing leases. They don't care about the price of the car, just the payment. So the dealer can make a big profit on the car, because the buyer doesn't negotiate price. If you have an idea of what to expect for price vs. payments, then you'll know what you can spend on the car, in terms of price.

Check out www.bankrate.com too...they've got some articles on credit and auto financing.

I also checked out capital one. I kinda like them.

36 and 48 month terms used to be the norm for a car loan. In the later '70s as car prices went up the financing folks got a little more creative and started pushing longer term loans. A 4 year is probably the a "short" term nowadays on a new car.

And umm.. Just a word of warning on Capital One - (since you mentioned them) - They'll pre-approve you easily enough but they limit which dealers you can work with to get the rate they'll offer you (they call it "approved dealers"). In general you can get lower rates and better deals NOT using them. If a dealer sees you coming in with a Capital One pre-approval they know you are limited in who you can deal with so you lose bargining leverage.

Craven:

You're getting good advice and are certainly savvy enough to see a scam coming, so let me just add two things:

-- since you have a limited amount of credit established, check with your bank and see what their terms are for the vehicle you're considering. Use this as a starting point if you're negotiating with a dealer. As Slap as indicated, dealers specialize in long-term (but high interest) financing, as well as low equity terms (which are not necessarily mutually exclusive). Dealers (and finance companies) get paid on the vigorish, so it's in their best interest for you to carry a note out in exchange for a low payment. BTW, I'm not convinced you'll have an interest rate in the teens since you are not a subprime (i.e. someone who has derogatory credit) prospect. Rates are as low as they have been in generations, so only the special finance companies can get away with charging usury.

If you are a member of a credit union, this is your best option for a low rate, but the term will be short and the down payment probably higher.

-- make sure your loan is simple interest (which means you can pay it off early without penalty).

This sounds odd, when I was looking into it they said they'd send me a "Blank Check".

It's a check from my name and all with a limit of how much it can be used for. They said I should fill out the amount and use of the check constitutes acceptance of the loan.

Under that "blank check" system do you think they can still limit the dealers?

Slappy gave some great advice. He is definitely correct on getting some interest rate quotes first and make sure they are the rates you will get giving your finances and credit history. When I went to buy a new car, I got a quote from my company on an employee rate for a new car. Went to the dealer, worked out a price first like slappy suggests and then when we talked finance, I told them I was already approved with a low rate from my employer. They asked if they could do better would I finance with them. Of course. They checked and did better. The ironic thing; the loan was with my company, but with the car dealer connections, the interest rate was even lower with all the same terms.

Dealers often get lower rates from the same banks you can walk into.

Craven, the blank check thing can work a couple different ways. It's either a true "blank check" you can use to buy from a franchised dealer, independent dealer, or private seller. That's usually for people with A credit.
Sometimes the check is good only at a franchised car dealer...ask the bank which they'd be supplying you with.

It's a moot point. Capital One rejected my application. Getting approved with no credit will probably be tough.

The only thing I could get was 18% and all my blood.

I paid for my car over 60 months, and now I've had it for 13.5 years, so it was worth it.

Approach your bank and ask them to refinance in a few months.

Or pay the loan aggressively.

Don't feel so bad about it in any event because every single person goes through it when they buy a car for the first time (and have no estblished credit and no co-signer).