Florida Consumer E-Newsletter May 2005
Download PDF version [968K PDF]
A Message From the Commissioner...
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Dear Friends: Buying a motor vehicle is one of the most expensive purchases you will ever make, second only to the purchase of a home. Financing that vehicle may be one of the most important decisions you will ever make. Most consumers need financing or leasing to acquire a vehicle. According to the National Automobile Dealers Association Annual Data Report, franchised |
That's why it's so important for consumers to arm themselves with information to make informed decisions when purchasing a new or used vehicle.
Remember, we're here for you. Our Consumer Hotline: calling within Florida 1-800-HELP-FLA (435-7352), outside of Florida 850-410-3800, ¡Español! 1-800-FL-AYUDA (352-9832), will answer any questions you may have about purchasing travel in the State of Florida, or visit us online.
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Automotive Financing - GET WHAT YOU PAY FOR!
If you decide to finance your vehicle, you should familiarize yourself with laws that authorize and regulate vehicle dealership financing and leasing such as, the Truth in Lending Act, Federal Consumer Leasing Act, Credit Practices Rule and the Equal Credit Opportunity Act. Under federal law you must be given in writing the exact terms and total costs of the loan.
Buyers may use what is called "direct lending." Direct lending is when the buyer obtains a loan directly from a finance company, bank or credit union. In direct lending, the buyer agrees to pay the amount financed, plus a finance charge, over a period of time after the buyer and the dealership enter into a contract and the buyer agrees to a vehicle price. The buyer uses the loan proceeds from the direct lender to pay the dealership for the vehicle.
The most common type of vehicle financing is called "dealership financing." This type of financing is when a buyer and a dealership enter into a contract where the buyer agrees to pay the amount financed and a finance charge over a specified amount of time. The dealership may retain the contract, or sell it to an assignee, such as a bank, finance company or credit union, which services the account and collects the payments. You should be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get.
Always contact lenders directly. Shop around for the best deal, compare the annual percentage rate (APR) and the length of the loan. Never focus solely on the amount of the monthly payment. The APR will be influenced by factors such as your credit history, current finance rates, competition, market conditions and special offers.
Dealers will sometimes offer very low financing rates for specific vehicles or models, but may not be willing to negotiate on the price of these vehicles. In most cases you will have to qualify for the special rates, and you may be required to make a large down payment. With these conditions, you may find it more affordable to pay higher financing charges on a vehicle that is lower in price or to buy a vehicle that requires a smaller down payment.
When you apply for financing, most dealerships have a Finance and Insurance Department, which provides one stop shopping for financing. The dealership will obtain a copy of your credit report (with your consent), which contains information about your current and past credit obligations, your payment commitments and data from public records such as bankruptcy filing or foreclosure. This report will also provide the dealership with one of your most important qualifiers, your Beacon Score.
A Beacon Score is a number used by lenders to help determine the likelihood that an applicant will pay creditors on time. A Beacon Score represents a snapshot of your overall credit risk at a specific time. The higher your Beacon Score is, the lower the risk to a potential lender, and the more likely they will be to give you a loan with favorable terms.
Before you sign a contract to purchase or finance a vehicle, do a lot of research:
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Examine your budget and determine how much you can afford to spend on the purchase of a vehicle, then consider the terms of the financing and evaluate whether it is affordable.
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Get a copy of your credit report so you are aware of what creditors will see (your report should also include your Beacon Score). Errors or negative information can impact your ability to get credit and or your finance rate.
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Check auto buying guides and other sources to find out the price range and other information for the vehicle you want to buy.
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Always compare current finance rates being offered by contacting various banks, credit unions or other lenders.
The Florida Department of Agriculture and Consumer Services works for the consumer to prevent fraudulent, deceptive and unfair business practices and to provide information to help consumers avoid them. To file a complaint or to get free information on consumer issues give us a call at 1-800-HELP-FLA (435-7352), or 850-410-3800.
Additional Resources
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The links below are for your information only. The goal of the Division of Consumer Services is to provide additional information to consumers. The Florida Department of Agriculture and Consumer Services does not review or confirm these sites for accuracy.
Equifax
A credit score is a rating used by a lender to help determine whether you qualify for a particular credit card, loan, or service. Based on information in your credit file, the credit reporting company analyzes your information using a complex mathematical model to yield your credit score.
Federal Trade Commisssion
We all need to get where we're going, and for most of us, the vehicle of choice is an automobile. For many consumers, a new car is second only to a home as the most expensive purchase they ever make. Learn more...
