SMOKINCHOICES (and other musings)

January 28, 2014

Get preapproved B4 shop’g

Personal finance

Find additional advice at Dispatch.com/business  .

DISPATCH FILE PHOTO    With loan pre-approval, you get an idea of what type of loan rate would apply to someone with your credit score, experts say.

Get pre-approved for loan before car shopping

By Susan Tompor • DETROIT FREE PRESS

For many consumers, the great car deals in 2014 are the ultra-low auto-loan rates combined with easier credit. • But saving real money will require digging through cryptic lingo for car loans, going beyond some wacky ads and, yes, even decoding some charges. • We’ve seen federal regulators in the past month highlight some ways consumers have been taken for a ride in the car-buying process.

In January, the Federal Trade Commission announced “Operation Steer Clear,” which cracked down on deceptive advertising. Get a postcard from a car dealer saying you won a prize at a dealership? Don’t bank on a fat check.

The Consumer Financial Protection Bureau also is taking issue with dealer markups involving car loans obtained at dealerships, bringing home the point that consumers need to shop around for loans before heading into the showroom.

For consumers, it’s essential to know the traps and tips.

• Should I worry about being able to get a car loan?

Not really. Mark Zandi, chief economist for Moody’s Analytics, said auto lending had one of its best years in 2013, and lending should remain strong in 2014.

“Sub-prime auto lending is almost back to its prerecession levels,” Zandi said.

Overall, borrowers with good credit can expect to see rates below 4 percent on both new- and used-car loans, said Greg McBride, senior financial analyst for Bankrate.com  .

• Take steps to lock up a loan before you take a test drive.

In December, the U.S. Department of Justice and the Consumer Financial Protection Bureau brought to light charges of discrimination in lending that allegedly took place through dealer markups regarding interest rates.

More than 235,000 African-American, Latino and other minority auto-loan borrowers who dealt with Ally Financial were unfairly charged higher interest rates for loans on cars or trucks because of discriminatory practices, the federal regulators said.

Ally Financial and Ally Bank were ordered to pay $80 million to harmed borrowers and $18 million in penalties relating to auto loans made between April 2011 and December 2013.

In a statement, Ally said the company does not engage in or condone violations of law or discriminatory practices and, based on the company’s analysis of its business, does not believe that there is measurable discrimination by auto dealers.

The lesson for consumers: Make absolutely certain to be pre-approved for a car loan before shopping for a car. Then, you have a better idea of what type of loan rate would apply to someone with your credit score, said Christopher Kukla, senior vice president for the Center for Responsible Lending.

Kukla pointed out that consumers don’t know what kind of extra compensation dealers might be getting on the auto-loan markups.

Money-saving tips

   Don’t be pressured for extra services or fees. Consider VIN etching. Some dealers might want to charge extra for the somewhat added security of etching a car’s vehicle identification number onto a windshield, warned Consumer Reports ShopSmart magazine. It could be a better deal if you have it done elsewhere.   

  Karl Brauer, senior analyst for Kelley Blue Book, said consumers need an itemized list of everything they’re paying for in a proposed deal. If you know you can buy wheel locks online for $30 or $40, for example, you can tell the dealer you don’t want to pay $120 for them, he said.    Source: Detroit Free Press research

Nice report for those who are lucky enough to be able to go out and buy a car — way to go!  Jan

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