When you're making a big purchase like a car, take time to play 20 questions. It's important that you understand a deal from top to bottom. The following four questions cover some critical areas.

Even though the car you're considering buying might do 0 to 60 in 3.5 seconds, it makes no sense to speed through the financing part of the deal. Instead, shift into low gear, relax, and ask your lender some important questions about your proposed auto loan.

1. What's the actual rate?

Make sure that your lender talks to you about the Annual Percentage Rate (APR). This includes all the fees associated with the loan. It's the best way to make an apples-to-apples comparison between prospective lenders. This rate may vary depending upon your credit report. It's a good idea to review that data before you visit a lender, to ensure that there are no mistakes or discrepancies. If there are, it can lower your score, and force the lender to give you a higher rate. Make sure that you correct the errors before your meeting.

2. Can you provide me with all the auto loan details?

For any loan, the devil-also known as the lender's profit-is in the details. Take time to review the entire document. Find out if there are any penalties or extra charges that could occur if you refinance the loan or pay it off early. Make sure that you understand the amount of each payment, the interest rate, and the length of the term. If you're confused, put some brakes on the transaction until you can get a straight answer from someone you trust.

3. Can you guarantee that the deal is set?

A favorite tactic of many unscrupulous lenders is to tell you that the deal is all set, but then call you back a few days later and say that the financing fell through. They'll then initiate another deal, but this time, the loan will be at a higher rate. Don't give them the chance. Before you leave the showroom floor, make sure that they can meet the loan terms that you've both agreed upon. Tell them that if they can't, you won't be returning to buy the car.

4. Does the car loan include credit insurance?

Many lenders try to include credit insurance with the loan. This can have some value, so you may not want to automatically dismiss it. Instead, review it with your insurance agent, and decide if it fits into your overall protection needs. If it does, have the lender include it in the APR. If you don't need it, double-check to ensure that the cost is removed before you sign on the dotted line.

Although no one wants to stretch out a car-buying experience any longer than necessary, plan to take it easy and ask plenty of questions before you make the big purchase. Slow and steady wins this race, or at least it could save you big bucks when you cross the finish line.

Published on January 28, 2008