What Happens When You Apply for Financing?
South Star Chrysler has a Finance and Insurance (F&I) Department, which provides one-stop shopping for financing. The F&I Department manager will ask you to complete a credit application. Information on this application may include: your name; Social Security number; date
of birth; current and previous addresses and length of stay; current and previous employers and length of employment; occupation; sources of
income; total gross monthly income; and financial information on existing credit accounts.
The dealership will obtain a copy of your credit report, which contains information about current and past credit obligations, your payment record
and data from public records (for example, a bankruptcy filing obtained from court documents). For each account, the credit report shows your
account number, the type and terms of the account, the credit limit, the most recent balance and the most recent payment. The comments section
describes the current status of your account, including the creditor’s summary of past due information and any legal steps that may have been taken to collect.
The dealership submits your credit application to one or more potential lender to determine the lenders willingness to purchase your contract from the dealer. These finance companies will usually evaluate your credit application using automated techniques such as credit scoring, where a variety of factors, like your credit history, length of employment, income and expenses may be weighted and scored. Since the bank, finance company or credit union does not deal directly with the prospective vehicle purchaser, it bases its evaluation upon what appears on the individual’s credit report and score, the completed credit application, and the terms of the sale, such as the amount of the down payment. Each finance company or other potential assignee decides whether it is willing to buy the contract, notifies South Star Chrysler of its decision.
Occasionally, South Star Chrysler may be able to offer manufacturer incentives, such as reduced finance rates or 0% APR on certain models.
The discounted rates may be limited by a consumer’s credit history, and are available only for certain models, makes or model-year vehicles.
What Influences Your APR?
Your credit history, current finance rates, competition, market conditions and special offers are among the factors that influence your APR.
How are my payments determined?
The size of monthly loan payments depends on the amount borrowed, the length of the loan, the interest rate and other factors such as your credit history. Paying more money initially lowers the principal of the loan, thus reducing individual payments. At any period during the loan you may opt to pay off the principal in its entirety, at which point the title of the vehicle is transferred to you.
General loan specifications:
Down payment amounts may range between 10 to 20 percent of the vehicle's total cost, although some purchases require no down payment. A typical loan period is five to six years.
Are loans available for used vehicles?
Yes, although they function somewhat differently from new car loans. A larger down payment is often required and the interest rate can be a point or two higher. Understandably, banks are more hesitant to loan money for used car purchases, as they would rather own a newer car if the borrower defaults.
Can extra fees and charges be financed?
Yes, registration, taxes, extended service plans and other supplemental charges may be included in the financing plan.
What is the advantage of financing through the dealership?
1. Convenience – South Star Chrysler offer buyer’s vehicles and financing in one place. Many times a loan decision can be approved within 1-2 hours.
2. Multiple financing relationships – South Star Chrysler’s relationships with a variety of banks and finance companies mean it can usually offer buyers a range of financing options many times at a lower rate.
3. Special programs – From time to time, South Star Chrysler may offer Chrysler Finical sponsored, low-rate or 0% programs to buyers.
What About a Co-Signer?
You may be required by the creditor to have a co-signer sign the finance contract with you in order to make up for any deficiencies in your credit history. A co-signer assumes equal responsibility for the contract, and the account history will be reflected on the co-signer’s credit history as well. For this reason, you should exercise caution if asked to co-sign for someone else. Since many co-signers are eventually asked to repay the obligation, be sure you can afford to do so before agreeing to be someone’s co-signer.
How do I get a Copy of my Credit Report?
It’s a good idea to check your credit report, which you can do every twelve months for free. To request a copy of your report, call 1-877-322-8228 or visit www.annualcreditreport.com. In some situations, such as when you are denied credit, you may be able to obtain additional copies for free. In other situations, if you would like to obtain a credit report more often than once a year, you can do so for a small fee by contacting any of the three major credit reporting agencies listed below.
1. Experian Phone: (888) 397-3742 Web site: www.experian.com
2. Equifax Credit Information Services Phone: (800) 685-1111 Web site: www.equifax.com
3. TransUnion Corporation Phone: (800) 916-8800 Web site: www.transunion.com
For more information about obtaining your credit report, visit www.ftc.gov/bcp/conline/pubs/credit/fcrasumary.pdf.
What should I do If I Encounter Financial Difficulty?
* Talk to your creditors if you experience difficulties making your monthly payments. Explain your situation and the reason your payment will be
late. Work out a repayment schedule with your creditors and, if necessary, seek the services of a reputable non-profit credit counseling agency.
* Know your obligations. Repossession can occur if you fail to make timely payments. Creditor or assignee may take the vehicle in full satisfaction of the credit agreement or may sell the vehicle and apply the proceeds from the sale to the outstanding balance on the credit agreement. This second option is more common. If the vehicle is sold for less than what is owed, you may be responsible for the difference.
* Be aware that the law in some states allows the creditor or assignee to repossess your vehicle without going to court.
Terms of Financing
Negotiated Price of the Vehicle –The purchase price of the vehicle agreed upon by the buyer and the dealer.
Down Payment –An initial amount paid to reduce the amount financed.
Extended Service Contract –Optional protection on specified mechanical and electrical components of the vehicle available
for purchase to supplement any warranty coverage provided with the new or used vehicle.
Credit Insurance –Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. Guaranteed Auto Protection (GAP) –Optional protection that pays the difference between the amount you owe on your vehicle and the
amount you receive from your insurance company if the vehicle is stolen or destroyed before you have satisfied your credit obligation.
Amount Financed –The dollar amount of the credit that is provided to you.
Annual Percentage Rate or “APR” –The cost of credit expressed as a percentage.
Finance Charge –The total dollar amount you pay to use credit.
Fixed Rate Financing –The finance rate remains the same over the life of the contract.
Variable Rate Financing –The finance rate varies and the amount you must pay changes over the life of the contract.
Monthly Payment Amount –The dollar amount due each month to repay the credit agreement.
Assignee –The bank, finance company or credit union that purchases the contract from the dealer.
Federal and State Laws
Truth in Lending Act – requires that, before you sign the agreement, creditors give you written disclosure of important terms of the credit agreement such as APR, total finance charges, monthly payment amount, payment due dates, total amount being financed, length of the credit agreement and any charges for late payment.
Consumer Leasing Act – requires the leasing company (dealership, for example) to disclose certain information before a lease is signed, including: the amount due at lease signing or delivery; the number and amounts of monthly payments; all fees charged, including license fees and taxes; and the charges for default or late payments. For an automobile lease, the lessor must additionally disclose the annual mileage allowance and charges for excessive mileage; whether the lease can be terminated early; whether the leased automobile can be purchased at the end of the lease; the price to buy at the end of the lease; and any extra payments that may be required at the end of the lease.
Credit Practices Rule – requires creditors to provide a written notice to potential co-signers about their liability if the other person fails to pay; prohibits late charges in some situations; and prohibits creditors from using certain contract provisions that the government has found to be unfair to consumers.
Equal Credit Opportunity Act – prohibits discrimination related to credit because of your gender, race, color, marital status, religion, national origin or age. It also prohibits discrimination related to credit based on the fact that you are receiving public assistance or that you have exercised your rights under the federal Consumer Credit Protection Act.
Fair Credit Reporting Act – Gives consumers many rights, including the right to one free credit report each year. It allows consumers to call one number to notify credit reporting agencies and credit card companies of identify theft. It also provides consumers with a process to dispute information in their credit file that they believe is inaccurate or incomplete.
For more information on federal credit regulations and consumer rights, contact: Federal Trade Commission Federal Reserve System
Washington, DC 20580 Washington, DC 20551 Phone: (877) FTC-HELP (382-4357) Phone: (202) 452-3693
Web site: www.ftc.gov Web site: www.federalreserve.gov
State Laws
Your state’s laws may provide you with additional rights. For information on these laws, contact your state’s consumer protection agency or Attorney General’s office (Web site: www.naag.org).