Tips Trim Cost of Vehicle 1/24/06

MANHATTAN, Kan. – Purchasing a vehicle can require a loan, but shoppers who look for the lowest price may save more if they are willing to do a little homework first, said Carol Young, Kansas State University Research and Extension family financial management specialist.

“Check your credit rating before shopping for a new – or newer – vehicle,” she said.

Do you know about Kansas Saves?

MANHATTAN, Kan. -- In January 2006, many K-State Research and Extension offices in the state are featuring the Kansas Saves Campaign. The campaign focuses on encouraging savings and reducing – or managing – debt successfully, much like campaigns that encourage wearing a seat belt or not smoking. The Kansas Saves Campaign is part of a national effort called America Saves and is sponsored by the Consumer Federation of America.

- Carol Young, Kansas State University Research and Extension financial management specialist

“Prospective lenders typically check a prospective borrower’s credit rating before offering a loan rate,” Young said. “If, for example, a prospective customer has a history of paying bills or making payments promptly, he or she usually will be offered a lower loan rate.”

“If you know your credit rating, you’ll be better able to compare offers and evaluate rates,” said Young, who advised checking with more than one loan provider.

“Special promotions such as zero down (payment) or zero percent loans may result in a low rate during the early months of the loan, but increase the rate during the life of the loan; lengthen the life of the loan; or apply only to certain individuals or car models,” she said.

“To shop for a loan, start with a financial service provider with whom you have other accounts,” Young said. “Use the time as an opportunity to discuss your overall financial ability and your credit rating. And, if your credit rating isn’t what you’d like it to be, take this opportunity to ask for suggestions about how to improve it before moving forward.”

Check local and national offers marketed by automakers and dealers. Look closely at any add-ons that can add to the price of the car and/or the cost of the loan that are offered during the financing process, Young said.

Stretching out payments for a longer period of time may mean more money in your pocket every month, but extending the payment period adds to the cost of the vehicle, she said. Plan to pay off a vehicle as quickly as you can without shortchanging other essentials to minimize interest costs.

“Consider a two-to-four-year loan as a start. A longer payment period may be a red flag that you are trying to buy more vehicle than you can comfortably afford,” Young said.

Savings Tip

MANHATTAN, Kan. -- After paying off an auto loan, continue to put an amount similar to the payment into an interest-bearing savings account. When it’s time to replace your current vehicle, use the savings to pay for the vehicle or reduce the amount of the loan.

For more information on managing money successfully, contact the local or district K-State Research and Extension office or check K-State’s financial management Web site: www.oznet.ksu.edu/financialmanagenent/

- Carol Young, Kansas State University Research and Extension financial management specialist

Insurance companies generally check a prospective customer’s credit rating (in addition to their driving record) before offering a quote, so a good credit rating may also mean a lower insurance premium, she said.

“In Kansas, prospective buyers may want to call the county treasurer’s office to compare the taxes due on a new vehicle,” she said. “Add up all of the costs before making your final choice.”

K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.