Paul A. Eisenstein: Ask for options on financing when buying a car

Paul A. Eisenstein

I’d seen the ad a dozen times and almost missed the new tagline: “Cadillac dealers,” the announcer intoned, “have access to 100s of banks and lenders” able to provide loans to potential customers.

What’s so unusual about that? Until recently, a potential Caddy buyer would have been steered to General Motors Acceptance Corp. for a loan. But the credit crunch has hit this so-called captive finance subsidiary hard, and for the most part, it’s now writing contracts only for those who have near-perfect credit scores of at least 700.

Those who buy domestic car brands -- such as Chevrolet, Ford and Dodge -- tend to be more blue-collar, with lower incomes and weaker credit scores, one reason Detroit’s Big Three have seen a plunge in their collective market share. In September, they fell below 42 percent of the American auto market because willing buyers either couldn’t get loans or walked away from usurious interest rates.

But even import brands, like Toyota, Nissan or Volvo, have seen credit tighten up.

If you’re looking for a new vehicle, you might have to dicker over more than just sticker price. But as the Cadillac ad suggests, there are plenty of options available -- if you’re willing to ask.

Traditionally, dealers promote the credit arms owned or affiliated with the car brands they sell, like GMAC or Ford Motor Credit. But the typical showroom also has access to other lenders, from local credit unions to national banks. So even if you’ve got a good credit rating, ask about your other options. And it may pay to check with a competing dealer.

Consider shorter loans. It might seem great to spread payments out over five years, but a 36-month loan often carries a lower interest rate, so the actual monthly payments may not be that different -- especially if you’re willing and able to come up with a good down payment.

And if you’re not planning to shop for a car for a few months, take steps today to improve your credit score, like paying down debts and closing unneeded credit cards.

Paul A. Eisenstein is an award-winning journalist who has spent more than 30 years covering the global auto industry. His work appears in a wide range of publications worldwide, and he is a frequent broadcast commentator on subjects automotive.


- Automakers typically prefer pushing loans from their own finance subsidiaries, but they're victims of the credit crunch.

- These days, always consider other loan sources, like your bank, and ask a dealer if they have other options available.

- Consider increasing your down payment or shortening the length of your loan to help reduce your interest rate and monthly payment.