How to Apply for Credit


Today it can be stressful shopping around when getting trying to get the best rates available when making any large purchase. Here at Crown Automotive, we understand that that why we have worked extremely hard to build relationships with several prominent lenders to be able to offer our customers the best rates possible for just about any credit situation. We really focus on our low-rate credit union financing which allows us to offer rates as low as 1.99% and as little as no money down, depending on the credit situation of our customers.* (Apply today to see if you are eligible). However, we do offer subprime finance for good people who might have less than perfect credit. Either way we will work tirelessly to get our customers the best deal with the best rates we can.

To clear the air, because we know we can run into first time buyers, or people who don't know how auto financing works....we are putting forth how the process goes so people have reassurance as well as peace of mind.

Here’s how to apply online for an auto loan:

  1. Once you apply, the lender will check your credit and contact you with a decision, in some cases in less than a minute. Some lenders will do a “soft pull” of your credit, which will not damage your credit score, to pre-qualify you. Later, at the dealership, you will fill out a full credit report for final approval. Other lenders will run a full credit to get you preapproved. In both cases, the lender will offer you a amount you can borrow at a certain interest rate. Some lenders will present a range of interest rates depending on whether the loan is for a new car, a used car or an older used car.
  2. The lender will then give you a no-obligation check or email you a certificate you can take to the dealership. (Note: Some lenders have restrictions on where cars can be purchased using their loan. For example, some lenders work with a network of dealerships. Other lenders won’t grant loans to buy cars from private party sellers.)
  3. Negotiate your best deal for the car, being sure to leave enough money to cover taxes and fees. For example, if the loan is for up to $20,000, look for a car in the $15,000 range because the final price will be about $16,500 or higher.
  4. Once you pay for the car with the lender’s check the loan is finalized at the purchase amount. When using a lender’s certificate, you may be required to fill out a credit application at the dealership which will result in a slight reduction of your credit score.

Preapproval and pre-qualifying help streamline the negotiation process because you can sidestep the car seller’s favorite tactic: the monthly payment game. If you negotiate for a monthly payment instead of the price of the car, it’s easy for the salesman to obscure the real price. But when you are preapproved, you become a “cash buyer,” meaning that you can ignore the monthly payment question and concentrate on negotiating only the price when shopping for a new car.

Here are other points to keep in mind as you shop for an online car loan:

  • Apply to several lenders to find your best interest rate. Lenders who only do “soft pulls” of your credit, don’t damage your borrowing ability. But it’s still smart to make all your loan applications within a two-week period to minimize damage to your credit score that can be caused by multiple credit checks over an extended period.
  • Be sure to also check the loan terms offered by your bank or credit union. Their rates are often very competitive with online lenders.
  • Gather documents you might need before beginning the loan application process: driver’s license, bank account numbers and pay stubs.
  • Set up your loan so you pay it off as quickly as you comfortably can. Shorter terms usually mean lower interest rates.
  • Be careful: If you’re shopping at a dealership, the finance manager will probably try to “flip” you — get you to use the carmaker’s financing. It doesn’t hurt to hear the pitch, but make sure all the terms — particularly the length of the payback period — are the same so you can accurately compare the dealership’s offer to your preapproved loan.

When shopping for a car loan, it’s important to be realistic. Just because interest rates are low doesn’t mean you should buy too much car. And remember, the most important thing for you, your budget and your credit score is to keep up with the payments and get the loan paid off on time.

What is a Subprime Car Loan?


"Subprime" doesn't have to be a dirty word when it comes to taking out a car loan to buy a new or used car.

In a perfect world, everyone benefits from low interest rates on car loans. But for a large swath of the population, that's not an option. Blame it on the effects on your finances of the Great Recession of 2008 or missteps in managing your money. Either way, a subprime credit score is not unusual.

"About 20 percent of all auto loans currently are subprime or deep subprime," says Rick Finch, vice president and general manager at LendingTree Auto Division. "Subprime loans are growing, and auto is the fastest segment."

Typically, you're considered a subprime borrower if you have a credit score of 619 or lower, Finch says. That doesn't preclude you from purchasing a car, but it will cost more because you're a greater risk in the eyes of the lender.

While everyone has considerations to take into account when buying a car, subprime borrowers have to know a little more. From understanding the ultimate cost of the vehicle to knowing your ability to meet your payments, here's a look at five things to ponder before taking out a subprime car loan.

Many car buyers go to the dealer with a monthly payment in mind and give little thought to what the ultimate cost of the car will be. As a result, the car buyer gets his or her $300-a-month payment, but that could mean a five-year loan may morph into a seven-year one.

"The longer the loan, the more interest you are paying, especially if you are buying a used car," says Chris Kukla, senior counsel at the Center for Responsible Lending. "Let's say you buy a 5-year-old car and slap a seven-year loan on that. Assuming your car can hold up 11 to 12 years, you'll still end up owing money on the car."

Knowing how much you can afford each month is prudent, but you also must figure out the interest you'll pay over the life of the car loan and any fees associated with borrowing money to determine if it's worth it. You don't want to end up in a situation where the $30,000 car ends up costing you $40,000.

"People get in trouble when they focus more on the monthly payment versus what's the total cost of ownership, including repairs, insurance and gas," says Finch of LendingTree Autos.

The phrase "It's all in the fine print" is particularly true when it comes to subprime car loans. After all, you are a risk and the lender is going to protect itself, usually by charging you more in fees. But the discrepancies between those fees can be great from one dealer to the next, which is why you need to know what you are signing.

"You need to be diligent in reading all the fine print and understanding what types of fees you are going to incur," says Eric Lyman, vice president of industry insight at ALG, the automobile industry research company. "There are various ways that lenders get compensation for their risk."

One common fee that lenders charge is a loan origination fee, but what one dealer charges can vary greatly from the next. "One lender's origination fee might be $500 while another might be $1,500 for the same car," he says.

Lyman says combing over all the details of a car loan will ensure that you won't be surprised by any unforeseen costs. What's more, knowing the fees ahead of time will put you in a better position when you are negotiating the purchase price and auto loan terms.

Everyone needs a mode of transportation. But before borrowing money, borrowers with credit problems need to think about the ramifications of not paying back an auto loan. After all, you don't want to end up in a worse credit situation because you can't afford your ride.

"When borrowing money, you need to make a realistic assessment of yourself and your capabilities," says Lawrence White, professor of economics at New York University Stern School of Business. "You need to think longer term rather than, 'I need this today and will worry about it tomorrow.'"

Industry experts say that while a BMW may be an appealing vehicle for your commute, your credit history and current household finances may make it more prudent to go with a lower-cost sedan.

"Just because it's a subprime car loan doesn't mean you shouldn't do it," says White. It's more about how much you need the car, did you get a good price on the car and can you afford to pay back the loan, he says.

If you have a credit score over 680, chances are you'll have auto lenders banging at your door to offer you low-interest car loans. Have a score below that and there may be no one calling.

"If you are a consumer with credit challenges, whether that's because you don't have a lot of credit history or missed payments, you have more work to do," says Kukla of the Center for Responsible Lending. "If you have a score below 680, the number of lenders willing to give you a loan decreases pretty rapidly."

While prime borrowers can easily get a low-interest auto loan from the bank down the street, Kukla says consumers with bad credit only have a couple of options: They can turn to the Internet or rely on a dealer.

If the dealer route is under consideration, know that it can be costly.

"One of the biggest misconceptions we see out there perpetuated by dealers is that they do business with dozens of lenders," Kukla says. "Nothing could be farther from the truth. The dealer is looking for the best loan for them, not the consumer."

When it comes to borrowing money when you have bad credit, you have to be able to take rejection. That's because you are likely to be turned down multiple times before you find a lender who will give you the money. On the other hand, you also don't want to assume the lender or bank will say no just because you have credit challenges without giving it a try.

Kukla says he hears plenty of stories of consumers who assumed a bank or credit union wouldn't give them financing only to learn later that they could have gotten it, and gotten it much cheaper, if they had asked.

"Never assume you can't get credit," Kukla says. "The worst thing you will hear is the word 'no.'"

Types of Extended Warranties


With the rising costs of service repairs in recent years, it is no wonder why so many have turned to extended coverage for their vehicles. Extended warranties for cars sound like a pretty sound investment, but that’s because they are. They protect your vehicle from mechanical breakdown for a specified period of time and/or certain mileage. Plain and simple.

But did you know that extended warranties for cars are actually known as vehicle service contracts? The reason they are not called “extended warranties”, is because a warranty comes direct from the manufacturer whereas these forms of coverage are from third-party provider.

When searching for extended warranties for cars, there are a lot of things to consider. Now, it really isn’t a competition as to which type of coverage is the best, because at Endurance we only offer our customers the best policies available. Each of these vehicle service contracts feature different aspects and amenities which is why it is best to examine your needs before choosing which one is right for you.

THE MOST POPULAR TYPES OF EXTENDED WARRANTIES

Exclusionary: This policy is the highest level of coverage offered. The exclusionary contract lists what ISN’T covered (exclusions) rather than what IS. This is because the coverage is so vast, that it is far easier to list what is not covered rather than what is covered. This type of coverage is also known as comprehensive coverage.

Stated Component: The second-highest level of coverage offered. The stated component contract lists what actually IS covered in the policy. If a component is not listed, then it is not covered by this policy. These contracts oftentimes cover a great number of components, though not quite as many as the exclusionary contract.

Power Train: This type of contract actually falls into the category of “stated component” because it lists the specific parts that are covered. The words “power train” refer to the drive train of the vehicle which typically consist of the Engine, Transmission, and Drive Axle. The Transfer Case is also included for vehicles with 4×4/all wheel driver. In addition to these parts being the most important components on the car, they are also the most expensive. Oftentimes power train vehicle service contracts will include extra amenities such as electrical components, A/C and fuel systems, etc.

Wrap: The wrap contract covers what isn’t included in the power train. In most cases, a vehicle will have a 36-month/36,000-mile warranty from the manufacturer. However, it will also have an additional warranty that covers just the power train. In cases where a vehicle still has its power train still covered, the wrap coverage provides the remaining protection for your vehicle to receive the same level of coverage as exclusionary. Power Train + Wrap = Exclusionary.

Most professional opinions will agree that the exclusionary coverage is the most practical of the extended warranties for cars. And because of its economical price and vast number of parts covered, most consumers choose it. Why take any chances with your investment, call us today to get coverage for your car and peace for your mind.

Rebuilding Credit with your Auto Loan


How to Rebuild in 3 Easy Steps

1. Getting Your Auto Loan

This is the most important step in this process, because your loan choice will determine the success of the strategy. The type of auto loan you can get depends on your current financial situation, especially your credit. There are four choices for vehicle financing: bank, credit union, finance company and dealership.

Many people assume that with poor credit, their options are limited to dealer financing or a subprime finance company (one specializing in consumers with poor credit). However, Charles Bernath, an Atlanta, GA tax and credit expert, says that’s incorrect. “Usually, you can go to a credit union, so check out that option first,” he suggests. Bernath also states, “Only dealers and subprime financing companies benefit from their loans.” Therefore, if you can avoid them and their typically double-digit finance rates, do so.

Michael A. Wishnow, Senior Vice President of Marketing & Communications for the Pennsylvania Credit Union Association, agrees. Actually, he says, “If you have a FICO score of 600 or better, you can probably get a car loan at most credit unions at single-digit interest rates.” He adds, “However, roughly only 50% of credit unions will write loans for people with FICO scores below 600.”

Banks, while more stringent than credit unions, are still better than dealer and subprime financing. But, says Jason Jewett, Personal Banker and AVP at SunTrust Bank in Laurel Springs, GA, “You’ll need a minimum credit score of 660 and clean credit report to get financed at most banks, and your finance rate depends on your credit score and history.”

Whatever your choice, do not borrow more than you can afford. Your monthly payment should fit your financial reality. So, while you may want that dream car, your vehicle is collateral for your loan. If you can’t pay your car note, you may lose the car and further damage your credit.

In fact, says consumer credit expert and author, Beverly Harzog, “Decide before you go car shopping exactly how much you'll spend, which might keep you from making an impulsive decision and financing a car that you can’t really afford.”

And, remember, the lower your FICO score, the less you’ll be lent to begin with. “With low credit scores, you should focus on a used vehicle and expect to be financed a maximum 80% of its Kelly Blue Book value,” advises Wishnow. 

Your choice of a loan type and amount, therefore, is critical to the success of this strategy.

2. Repaying Your Auto Loan

This is the most important and straightforward aspect of this credit restoration strategy. That’s because when you get an installment loan to rebuild your credit, naturally, you must pay it back. Harzog, whose latest book is The Debt Escape Plan: How to Free Yourself From Credit Card Balances, Boost Your Credit Score, and Live Debt-Free, emphasizes that “It’s critically important to make your car loan payment on time each month.” Even a single late payment can set back your credit rebuilding strategy.

Repaying your loan on time, for at least nine months to a year, will help increase your credit score. But, you’ll also have to pay all of your other bills on time, have the right mix of credit, and not have too much debt. You must manage all of your credit well. Otherwise, this strategy won’t help, and may even hurt, your credit.

3. Refinancing Your Auto Loan

“Sometimes,” says Wishnow, “your payment is affordable, but your interest rate far too high.” This is most often true if you quickly financed a vehicle because you must have one or felt forced to accept a high interest loan because of your credit. Bernath, who has refinanced all three of his daughters’ auto loans, says, “You should refinance your vehicle loan when that happens.”

And, in most cases, while you’ll need to take specific steps, you can refinance much sooner than you think. If you got a double-digit interest loan through dealer or other subprime financing, you’ll want to refinance that loan as soon as you can.

Often, if your credit score is above 600, you can go to a credit union and refinance your loan, even if it’s immediately after getting into the bad loan. But, Wishnow says, you’ll have to become a member of a credit union.

Jewett explains that if you’ve used this approach to successfully rebuild your credit and have no negative entries on your credit report, “Once your score is at 660, you can use a bank to refinance your auto loan.”

All three credit experts agree that refinancing is both a great way to reduce the amount you pay over the loan’s life and also to reduce your monthly payment, in most cases. So, pursue that as part of this plan.

If you apply all three of these steps carefully, using an auto loan to rebuild your credit is one of your fastest and best paths to boosting your FICO score.

What is an Extended Warranty?


When you are purchasing a used car, it may – or may not – have time left on the original manufacturer warranty. If the vehicle has exceeded the terms of the original warranty, you may want to purchase an extended warranty, also known as an extended service contract.

When a car rolls off of the production line, it is covered by a manufacturer warranty. The terms and lengths of the warranties vary based on the manufacturer. But when you are purchasing a pre-owned vehicle, you will only be eligible for whatever manufacturer-supplied warranty is left based on years and/or mileage. For example, Ford’s Basic Warranty expires at 3 years or 36,000 miles – whichever comes first – so, even though a vehicle may be only two years old, if it has over 36,000 miles on it, it will not have that warranty coverage.

Service contracts are beneficial for used car buyers with bad credit because although recent vehicles are indeed more reliable, the advanced features and safety systems cost more to replace if they malfunction. If you are trying to maintain a budget, and even if you should have some funds set aside to cover maintenance for the vehicle, you probably don’t want to have to deal with high repair bills.

What Is An Extended Warranty?

extended warranty
While some may use the term extended warranty for this type of protection, it’s not actually an extension of the original warranty – it’s a used car service contract, not unlike a type of insurance policy. Typically, these contracts range from $25 to $35 per month, and may or may not have a deductible when repairs need to be made.

  • Know what is covered.
    When purchasing an extended service contract, be sure that those essential items that are most likely to encounter issues are covered, such as the anti-lock brake system, electrical system, automatic or manual transmission, air conditioner and power-steering systems.
  • Who is backing the service contract?
    There are two basic types of coverage: manufacturer backed and third party. The ones that are backed by the manufacturer will allow repairs to be made in any franchised dealership by factory-trained technicians using factory parts. It would basically be an extension of the original manufacturer warranty even though the systems covered may vary. If you are getting a service contract through a third party, the repairs may need to be done at a repair shop or dealership that is authorized by the company you have the service contract with in order to be covered.

    The drawbacks of a third party company are that you may lose the coverage you have paid for in the event that the company goes out of business. Some contract providers may even require you to pay for the entire repair first and wait for reimbursement from them. As a best practice, avoid these types of plans.

  • Will you need it?
    If you are dealing with damaged credit and/or financial issues, you will benefit greatly from the right kind of contract on your new or used car in order to avoid costly repairs. Be sure to read the terms and conditions carefully before signing the dotted line on any service contract you are considering.
Crown Automotive Group, 8103 Dixie Hwy, Louisville , KY 40258 502-890-5327
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