There are lots of great vehicles available today – if you’ve got the money. Even though the deals are very attractive as dealers scramble for customers, the painful truth is that money is hard to come by. You’ll need funds for your down payment and enough income to make the monthly payments, whether you purchase or lease.

How can you obtain financing in today’s tough credit market? Here are some steps.

  1. Check your credit rating – The amount of credit, or the likelihood that you can get credit, depends in large part on your credit rating – and your credit score. Consumers with top tier rating of 720+ are the best credit risks, and it goes in descending order from there. Your first step is to check your credit rating through the three nationwide credit reporting agencies: Experian, TransUnion and Equifax. You can obtain a free annual report through If you have any negatives on the report, correct them before you shop for credit.
  2. Know how much you can spend – It doesn’t pay to look at that loaded luxury car if all you can really afford is a good midsize sedan. Lay out all your monthly cash expenditures for mortgage or rent, utilities, insurance, medical, food, dining and miscellaneous expense. Are there any areas you can economize, cut down or eliminate? This may give you an extra hundred or so dollars each month that can go toward your new vehicle. Don’t forget you’ll need to factor in car insurance as well.
  3. Determine your purchase strategy – Know whether you plan to lease or buy your vehicle. There are pros and cons to each decision. With a purchase, you own the vehicle, but you may not be able to afford the vehicle you really want. When you lease a vehicle, you can probably get the next-highest model, but you’re only, in essence, renting the vehicle. Once the lease is up, the vehicle goes back. And there are other restrictions as well, including mileage caps and penalties for excessive mileage, wear, etc.
  4. Research incentives and rebates – How much you can afford also depends on what attractive incentives and rebates dealers and automakers are currently offering. Research all the automakers to see who has the best deals. This will help lower the amount of your down payment. It also reduces the loan-to-value ratio and makes your loan more attractive to a potential lender.
  5. Go for the loan – Check out the automakers’ in-house financing divisions as a first step. You can do this yourself or work through the dealer. Almost every automaker has a captive financing arm — even General Motors Acceptance Center (GMAC) is still financing GM vehicles. Don’t forget that the dealer has many more options for auto loans that they can turn to. There’s also your own bank or competitive banks, consumer finance companies and credit unions. The best bet is to get pre-approved for your financing – before you go to the dealer. Having that pre-approval in hand will also strengthen your buying position with the dealer. Remember, they want your business.

By Suzanne Kane

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