Dara Duguay, a personal finance expert and director of Citi's Office of Financial Education, offers advice to help consumers understand the commitment they are making when financing a car and to minimize any unexpected issues that may arise.
Some of her tips can help dealership finance and insurance staffers work with customers, put them in the right vehicle and keep them out of financial trouble.
- Make sure the loan you obtain is well within your means to pay. This means figuring out the cost of auto ownership — which is more than just the price of the car. Be sure to budget for related costs such as insurance, gas, registration fees and maintenance.
- A car loan is a contract. The inability to make timely payments can damage credit ratings or trigger even more dire consequences, such as repossession.
- Downsize, not supersize. Though that SUV may have caught your eye, consider additional costs for gasoline, insurance, parking, even car washes. A fuel-efficient car may be a better pick.
- As soon as you face any financial difficulties, let your creditor know, so that you can explain your situation and work out a repayment schedule.
- Repossession does not relieve you of your obligation to pay for the car. If the vehicle is sold for less than what is owed, you may be responsible for the difference.
- If necessary, seek the services of a non-profit credit counseling agency that may be able to mediate between you and your lender.