Auto Financing or Bust

After months of sputtering hither and to, days spent in the shop, and that noxious odor emanating from the vents, Old Reliable has finally kicked the bucket. Of course, you’re sad to see her go–not only because she got you through those intrepid winter storms and held out when it came time to shuttle yourself, family, and friends to, well, wherever but because you know that getting financing to replace Old Reliable, given the national and personal economic crisis, will be highly difficult and daunting. If you have less than perfect credit or have already

been rejected for financing from the auto manufacturer, there is some action you can take, says Ralph Ebersole, automotive consultant at Cars.com.

Get your credit report. If you’ve been rejected for financing or are about to apply for it, Ebersole recommends that you obtain copies of your credit report. “If there is any derogatory credit that [you] do not agree with, contact the creditor directly to ask for it to be changed.”  Clearing up the blemishes on your credit report could help to raise your score and make you look like less of a risky investment.

Try a credit union.

If you follow this blog, then surely you are aware of my fondness for credit unions. If an auto manufacturer has denied you financing, think about checking out a local credit union—and consider making a credit union your first stop for financing in the future. Credit unions have competitive interest rates and, usually, lower fees than auto manufacturers and big-time banks.

Leverage your options. When you have options, you have more room to negotiate. Before heading to a dealership, figure out what interest rate you’re eligible for by visiting Capital One Auto Finance, says Philip Reed, senior consumer advice editor at Edmunds.com

. “You can apply online and it will tell you what interest rate you apply for and how much they’ll loan you,” says Reed. The financier will send a blank check–which, of course, will not be worth more than your predetermined credit limit–that you can use to negotiate a lower rate at the manufacturer. According to Reed, usually “the dealer will say, ‘We can beat whatever interest rate they have there.’”

Buy here, pay here. With dealerships that offer a buy here-pay here option, a car buyer’s credit score does not come into play. These dealerships sell cars as is. Reed says this is the last form of financing people should consider since these dealerships do not back up the condition of the car with a guarantee that is going to be useful to you. Ebersol recommends finding a reputable buy here-pay here dealership that will report your payments to credit agencies so you can work on boosting your credit score as you pay for the vehicle. Since you’re purchasing a used vehicle, you should consider bringing a mechanic along to inspect it.