Discussing Financing Is Important for New Car Buyers

Washington DC July 27, 2007; The AIADA reported that with approximately 7.5 million students exchanging the comforts of home for the freedom and responsibility of living on their own at college campuses, AWARE, a consumer education non-profit specializing in auto finance education, reminds parents to have "the talk" with their kids. College students should be reminded to be safe and responsible with their credit - particularly if they’re thinking about buying a car or truck in the future.

"The decisions young college students make today will affect the rate at which they can finance a car or truck tomorrow," said Eric Hoffman, spokesman for AWARE. "Today’s financial decisions will also affect the amount of credit a finance company will extend to a borrower. Because credit history plays such an important role in determining the annual percentage rate of any form of credit, demonstrating responsibility with credit as a freshman or sophomore says an awful lot to a financing company when the time comes to buy a vehicle."

AWARE says those who’ve not yet established a credit profile should focus on paying their bills on time and not spending more than they have. For those who have had past credit problems, it means now is the time to take necessary action to repair their credit history.

"Buying a car or truck along with leading the collegiate life represents the ultimate freedom for many college students," Hoffman said. "We’re working to educate both first-time and experienced buyers on the benefits of establishing good credit now. It’s a lot easier to establish good credit initially than repair bad credit later."

AWARE says that overall American consumers do understand the value of establishing good credit history. AWARE’s public opinion data shows that nearly 80 percent of Americans know that their credit history affects the annual percentage rate (APR) for financing a new car or truck.

Besides a borrower’s credit history, a number of variables determine a borrower’s APR including prevailing rates, the amount financed, the terms of the financing contract, the down payment amount, the vehicle make and model, competition, market conditions and special offers.

Here are some tips for parents to share with college students considering financing their first car or truck:

1. Build a budget with your kids: Help your student determine a price range and make them stick to it. Remind them to factor in vehicle related costs outside of the monthly payment, such as insurance, maintenance and gas costs. Check out the "Affordability Gauge" at http://www.autofinancing101.org/LearningSuite.

2. Have your kids check out their free credit report: Because credit history affects the APR, it’s always a good idea to see what finance companies will see when judging credit worthiness. Have your student get a free copy of his or her credit report through http://www.annualcreditreport.com/. This way, any errors can be corrected and other steps can be taken to improve their credit score before getting their heart set on a vehicle.

3. Shop around for financing: There are thousands of sources of financing for automobile purchases, such as dealerships, banks, credit unions, and other financing companies. In this highly competitive marketplace it’s smart to check annual percentage rates and other financing terms from multiple sources.

4. Be "In The Know": Help your student learn the lingo so they can "talk the talk and walk the walk" when making what is likely the largest financing decision of his or her life. Many of these terms can be found in the glossary at http://www.autofinancing101.org/LearningSuite.

5. Understand How to Build Credit: First-time car buyers will likely hit obstacles that those with more established credit histories won’t face. Talk with your student about the pro’s and con’s of you or another credit-responsible adult being a co-applicant, which may help secure a more competitive rate. Also, through dealerships, many finance companies offer first-time car buyer programs that take into account other good credit behaviors, such as rent and utilities payments, that might not be showing up in an early credit user’s credit score.

6. Ensure your kids make their payments on time: Late or missed payments incur late fees and can even cause the vehicle to be repossessed, permanently. A bad payment record will also appear on his or her credit report, damaging an ability to get credit in the future.

A host of tools, calculators, articles and other resources to help consumers sufficiently prepare for their auto financing decisions can be found in the "Auto Financing Learning Suite" section of AWARE’s website - available in both English and Spanish. AWARE is a national nonprofit organization, formed by leaders in the auto financing industry, with a singular mission of enhancing understanding of the vehicle financing process. The group offers free educational materials and other resources in an environment free of advertising or lead generating sales tactics.

AWARE’s membership includes the following:

American Financial Services Association Land Rover Capital Group Lithia Motors National Automobile Dealers Association National Association of Minority Automobile Dealers Mazda American Credit American International Automobile Dealers Association National Auto Finance Company American Honda Finance Corporation Nuvell Financial Services American Suzuki Financial Services Saab Financial Services Corp. AutoNation Sonic Automotive, Inc. DaimlerChrysler Financial Services Americas Toyota Financial Services Ford Motor Credit Company United Auto Group, Inc. GMAC Volvo Car Finance North America Group 1 Automotive, Inc. Wells Fargo Auto Finance Jaguar Credit

Source: Americans Well-informed on Automobile Retailing Economics