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THE BEST WAY TO Finance a New Car - advice: selecting and financing a car - Brief Article

IN today's changing consumer market, with increasing competition between car dealers and financial institutions, securing reasonable financing is easier than ever. But here, as elsewhere, fortune favors the prepared and gives a special bonus to shoppers who are willing to follow a few tried-and-tested rules.
The first rule is simple. Buy a car that fits your finances. Genevia Fulbright, vice president of Fulbright & Fulbright, CPA, in Durham, N.C., says you should understand your cash flow, and the reason you are buying this car. If it's solely for business, leasing may be an option. Also, you have to be aware of the hidden car costs, like insurance, gas and parking. Make sure all of these are taken into consideration when buying a new car to avoid surprises. A good rule of thumb for car payments is that the monthly total should be no more than 20 percent of your net income.
The next rule is to pre-shop. Use the Internet, use the library, use your neighbors, use competing car salesmen--use every available medium to find out who is offering the lowest financing and the lowest interest rates. Compare rates at banks, credit unions, car dealers. Check the hidden costs. Does this plan penalize you for paying off the loan early?
Experts say the informed buyer, or the buyer who seems to be informed, and who can quote the different rates offered by banks, credit unions and car manufacturers, will almost always get the best deal. A former Chicago banker advises new car buyers to make salesmen and financiers work for them by quoting the rates they have been offered and by asking salespersons to match the rates or top them.
It's also a good idea to obtain a copy of your credit report. This step will make the hunt for financing much easier, experts say. While some specialists say you should have your financing arranged before you arrive at the dealership, others say you should consider the numbers of the dealer's finance officer. Sometimes dealers run special low annual percentage rates for qualified customers (those with good credit who meet income requirements), and also rebates to sweeten the pot, says Alex Elam, a car salesman from Bakersfield, Calif. "You're always wanting to see what the dealer has to offer," Elam says.
On this level, you must make a clear distinction between the sticker price of the car and the real price of the car--the sticker price plus the money you pay to finance your purchase of the car.
This means, among other things, that you must understand the three iron rules of car financing: 1.) The less you know (about financing, about available interest rates, etc.), the more you generally pay. 2.) The smaller the downpayment, the higher the total price. 3.) The longer you finance the car, the more you are going to pay.
It's a law. Thirty-six months cost more than 24 months, and 48 months cost more than 36.
Here, as elsewhere, knowledge is, among other things, money.
Once you understand these iron rules, you can make them work for you by seeking and making deals that will let you keep more of your money.
Mary C. Haynes of Lithonia, Ga., turned to the Internet to get more information about buying a car. The 58-year-old human resources specialist at Georgia Tech said she went to a Web site and punched in the options she wanted.
"Four or five hours later," she says, "a representative called me and said that within 48 hours they would locate a car for me."
And they did, at a much lower price than she would have paid otherwise.
While Haynes' story may not be typical, it illustrates the new dynamics of the changing marketplace.
What hasn't changed in this market is the need for information and planning. Alex Elam, the California car salesmen quoted above, says that the car showroom should be the last, not the first, stop of a serious shopper.
"By the time a customer goes to a dealership," he says, "they're going to a buy a car. You have to understand what you're buying. The key is knowing what you want."
COPYRIGHT Johnson Publishing Co.
COPYRIGHT Gale Group

Bad-credit blues: Bill collectors are hounding you. You can't buy a car, a home or even get a cell phone. You don't have to live like this. Even a sister who had a six-figure debt found a way to financial freedom. You can, too.

For much of my adult life I was burdened with having poor credit. Falling into debt felt nightmarish line ghost of past bad choices always trailing behind me, Not even breaking up with a boyfriend left me as depressed as I was for the five years after I ruined my credit. I learned line hind way that playing fast and loose with money is dangerous, not just financially but also emotionally.
As alone as I felt at the time, I've since discovered that many Black women from all backgrounds have suffered from bad credit at one time or another. This is true for other races and ethnicities, but there are reasons that we in particular fall prey to this. "Black women don't meet the criteria of being the so-called right gender and race. To compensate, many of us try to bolster our sense of identity and self-worth by buying things that somehow give us a sense of worth and self-esteem," says Linda James Myers, a psychology and African-American studies professor at Ohio State University in Columbus "The key is to reverse the faulty formula that has us trying to define our worth by external criteria like how we look and what kind of car we drive."
A Family Affair
When I began to examine my behavior, I realized that most of my family members struggled with credit issues, too. I remember sitting around the dinner table during holidays, laughing hysterically at a relative's dramatic tale of how he or she had cursed out some annoying creditor calling for a payment. In my young mind, paying bills on time was not nearly as much fun as not paying them.
Still I got off to a great financial start. I juggled five credit cards in college and always paid the entire balance on time each month. Because I had part-time jobs and made good money, that was fairly easy to do. Besides, I was very conservative in my spending then. It wasn't until I graduated in 1994 that things went wrong. I was malting a pitiful salary as a paralegal--a job I hated. Buying expensive clothes and shoes made me feel better when I couldn't figure out how to move forward professionally. Most months, I'd spend about $1,000 on clothes--while earning only $300 a week.
Soon my credit-card debt grew to about $8,000. I also blew off my student loans. After all, I figured I owed tens of thousands of dollars in student loans, and it would take years to pay off, so it could wait. I spent the little money I had on clothes and travel, extras I refused to sacrifice because they made me happy at a time when I was generally unhappy. I was in a vicious pattern of purchasing to make myself feel better and being miserable as my expenditures spiraled. Ashamed and unsure of bow to break the cycle, I continued to shop and avoid my bills. Denial was my best friend.
Eventually I could no longer ignore the debt. My cards were charged to the limit and since I had stopped paying the bills, I could no longer use them. The letters from Visa and MasterCard flooded my mailbox. The creditors who called were alternately sympathetic and truculent. They even harassed Ma, my poor grandmother, whom I had listed as a contact on my student-loan application.
And there were other reminders of what a mess I'd made. I couldn't get an apartment without my father's cosigning. I couldn't make hotel or airline reservations with no credit card. Then, when I finally got a job at a newspaper--a job I had wanted for some time--I got called out by my boss because my application for a corporate card was declined. At that point, deeper shame set in. Family members knew I was shirking my responsibilities, and I imagined that everyone at work knew, too. For at least a year I had to pay my corporate expenses out of my own pocket and wait for reimbursement. And that meant other bills were held up. The cycle continued.
I eventually gravitated to purchases that didn't require a credit check, like prepaid cell phones. Here I was, an Ivy League educated woman living like someone on the lam. At 26, I was a little more settled in my journalism job and feeling more confident professionally, but I couldn't do anything on my own. I felt as if everyone-but me--had her act together.
Secrets, Lies and Suffering
The discomfort that comes from ruining your credit extends beyond just getting rejected for a mortgage. There are physiological repercussions from constantly being anxious about calls from creditors or a visit from the repo man. Some psychologists say that people dealing with bad credit often gain or lose weight, suffer from insomnia or anxiety, and get depressed. On Saturday mornings, my heart would race each time the phone rang because that's when creditors usually called. For two or three years I didn't answer my phone then.
"When you ruin your credit and are ashamed of it, you want to keep it a secret. So it becomes a vicious cycle of lying, shame, secrecy and covering up, which leads to more shame," says Brenda Wade, Ph.D., a family psychologist in San Francisco and coauthor of What Mama Couldn't Tell Us About Love: Healing the Emotional Legacy of Racism by Celebrating Our Light.
Credit and Codependence
Unlike me, some women are paying the price for other people's mistakes. Most of us have girlfriends whose credit was ruined after they helped friends, partners and/or family members get a loan or credit card. Cheryl Smith, * a 39-year-old nurse from Brooklyn, continually let other people use her credit. "I've been a nurse for 17 years, so I'm a nurturer and caretaker by profession and nature," she says. But while she was being "kind" and allowing people to abuse her credit, she ultimately hurt herself. "You might tell yourself you're helping out a friend, but you are really being codependent and setting yourself up," cautions Wade.
Smith didn't initially see it that way. She not only took her boyfriend out to party and eat regularly, but she also used her credit to secure a loan for a $5,000 motorcycle he wanted. The same boyfriend told her she shouldn't pay her student loans because they were eating up too much of her cash flow. She admits now that she wanted to make him happy. "I wanted the relationship to work more than I wanted anything else," says Smith.
Frequently when a woman spends exorbitant amounts of money on a man, it's not just out of benevolence. E. Carol Webster, Ph.D., a clinical psychologist in Fort Lauderdale, Florida, says that some Black women overspend as a way to buy love and affection. When it comes to Black men, we sisters often convince ourselves that the world is tough on them--hence their poor financial state--and we try to do whatever it takes to help them.
As Smith's debt grew, it occurred to her that listening to her boyfriend's advice not to pay bills was damaging her life. When she expressed concern about her growing debt, he shrugged it off. It finally struck her that if he didn't care about her financial well-being, he probably didn't care that much about her. Their relationship ended.
Between student loans and credit-card debt, Smith owed about $100,000. But with her man out of her life, she vowed to get back on track. By working overtime, Smith made about $98,000 a year. This put her in position to cover her expenses and begin making a significant dent in her debt. Within a few years, she had paid off her five credit cards. Those zero balances let her allocate a whopping $1,200 per month to her consolidated school loans. Most important, she has sworn never to let others use her credit.
Getting Free of the Debt Burden
People who have bad credit don't have to feel--as I did--that there's no hope, according to Christopher M. Pirtle, a financial adviser at the Peake Financial Group in Silver Spring, Maryland. There's a way out of debt, if you choose to take control of the situation.
"The first thing I recommend: People shouldn't beat themselves up over money they owe," says Pirtle. "The beautiful thing about credit is that it can be fixed by taking the right steps." More people than you realize have had the bad-credit blues and have overcome them, so there's no point in being ashamed.
As for me, I got tired of not answering my phone on Saturday mornings. But more than that, several friends whom I knew had struggled with bad credit at some point had cleaned up their act and now owned homes. So four years ago, at 27, I made a list of my debts and moved back in with my mother, who barely charged me rent; that let me put about $300 a month toward paying off my credit cards. I owed $300 to $500 on each, and they took about a year and a half to pay off. The monster was my American Express bill, at a hefty $5,500. I used one year's tax refund and an interest-free family loan (which I paid back in a year) to pay it off. I consolidated my student loans and rebuilt my credit with a secured credit card. And I came clean about what I was going through to my friends, my family and my boyfriend, it was time to forgive myself and move on.
Today I have five unsecured credit cards (each with a zero balance), a "regular" cell phone and a home--in my name, which I own! And if I can't buy something with cash, I don't buy it at all.
* Names and other identifying details have been changed.
Life After Debt
Yes, you can get there! But you didn't create debt overnight, and you can't make it disappear instantly either. Commit to resolving the issues over a 15-to-24-month period. "That's a time frame sufficient to create change, because without a time frame most people will procrastinate," says David Hinson, founder of the Wealth Management Network in New York City. Here's how to take charge and go from owing money to growing it:
Picture prosperity. Visualize your dream financial state. Envision owning your own home, paying cash for a car, going on exotic vacations, having a comfortable retirement. This prepares your consciousness for wealth.
Be thankful for what you do have. Money may be tight, but you still have assets that can help you make more, such as good health, an education and a supportive family. Make a list of the positives, including your job, any special skills you can use to earn extra income, items of value you can sell and any savings that might be applied to debts.
Stay focused. Make another list of how bad credit has held you back (couldn't quality for a mortgage, was forced to pay more for car insurance) to remind yourself hew important it is to get back on track. When you're tempted to pull out that plastic, pull out this list.
Know the score. You'll want to review your credit history, find out your credit score, and correct any errors. Order reports from the three major credit bureaus, Equifax ([800] 685-1111), TransUnion ([800] 916-8800) and Experian ([888] 397-3742). If you've recently been turned down for credit, you're entitled to a free copy of your report. (Web sites such as Consumerlnfo.com or myFICO.com can give you access to info from all three companies.)
Assess the big picture. Dealing with denial will empower you. Use the credit reports to map out all your debt, including credit-card and student-loan balances. Don't forget to account for any sums owed to friends and family.
Create a spending plan. A budget will be your best friend and isn't hard to draw up. Keep track of all expenses for a month. Next review how much was spent on needs (groceries, rent, gasoline) versus wants (another designer outfit, a fancy French dinner out). The idea isn't to omit the latter category, just to look for cheaper thrills (trade out-fits with a stylish friend, learn to make souffle at home). Commit the money saved to erasing debt. For more on budgeting, read Girl, Get Your Money Straight! by Glinda Bridgforth, or go to cnnmoney.com.
Tackle one debt at a time. Unless you've chosen to consolidate (consult the resources below for more info), put the bulk of your bill-paying money toward your worst debt--the one with the highest interest rate---and continue paying the minimums on the rest. Contact each creditor and tell them how much you can pay toward the balance each month. Most will be willing to work with you.
Give yourself credit! Reward yourself with inexpensive treats for incremental goals, such as closing an account or increasing a monthly payment, to keep yourself motivated. Just make sure to budget for them.
Don't go it alone. Help is available if you need it. A nonprofit credit-counseling agency, such as one of those listed below, may be able to help.
Consumer Counseling Centers of America, Inc., Washington, D.C.; (800) 690-2232; consumercounseling.org American Consumer Credit Counseling, Newton, Massachusetts; (800)769-3571; consumercredit.com
Consolidated Credit Counseling Services, Inc., Fort Lauderdale, Florida; (800) 728-3632; debtfree.org.
Kemba Dunham is a writer living in Brooklyn.
In "Bad-Credit Blues" (page 178), first-time contributor KEMBA DUNHAM gives readers Tips on how to take Control of their finances And become debt-free. "Even though you may be in a financial hole," Dunham says, "you shouldn't be embarrassed about it or feel as though it's not fixable." She shows how being proactive and having the self-discipline to repair you r credit will give you a better chance at get ring that home, car or business loan.
COPYRIGHT 2004 Essence Communications, Inc.
COPYRIGHT 2004 Gale Group