blank check auto loans only

If researching a new car online is a snap nowadays, applying for a loan to pay for it is ... well, half a snap.

While about two-thirds of new-car shoppers research their purchases on the Internet, all but a small percentage - about 6 percent by one estimate - apply for the loan the "old-fashioned" way - at the dealership, in person.

That's so even though more than half of dealerships permit consumers to file credit applications online, according to a survey last year by the National Automobile Dealers Association.

Perhaps "old-fashioned" is sometimes synonymous with "tried and true."

Market researchers J.D. Power and Associates say that, between January and March of this year, almost 59 percent of new-car deliveries were purchases made with financing arranged through dealerships, usually in person. Another 19 percent were leases, and the rest, about 23 percent, were to "cash buyers," a category that includes purchasers who arranged financing outside the dealership, either on the Internet or via telephone, mail or in person, as well as those who simply paid cash out of pocket.

"Financing online is still in its infancy and has not grown rapidly in recent years. It's a little bit of a mystery as to why it hasn't caught on," said Dennis Galbraith, Power's senior director of auto marketing solutions. One possible reason, he says, is that people tend not to think about financing until they've found the car they want, at which point they're usually in a dealership.

At least one other authority on car-buying agrees. Jack Gillis, public affairs director of the Consumer Federation of America and author of "The Car Book," an annual buyers guide, said, "I think part of it is because consumers are programed to link the financing with the purchase. ... Most consumers think in terms of what the monthly payment will be so they've rolled both things into one."

Slowly going online

Still, the number of people applying for financing online is increasing, if slowly.

One who did so recently is Alex Minzer, 41, who runs an office supply company in Lynbrook and lives in Manhattan. He financed his Acura TL sedan last September with a 60-month loan from Capital One Auto Finance, the industry leader in online financing, after his own bank gave him an interest rate that he considered too high. "It was a marvelous experience," he said, of dealing with Capital One. "I completely got financing out of the way and I had a check in my hand to use as I please so I could walk into any dealer that I please."

Another Capital One customer is Phil Prestino, 48, of Brooklyn, who runs a promotional company and financed a Lexus RX 330 sport utility vehicle for his business. "Within 20 minutes, I was approved," he said.

Brian Reed, Capital One Auto Finance vice president in charge of Internet operations, says about half the loans he makes are through dealerships but that the customers who come to Capital One directly online shortcut the approval process, find out immediately what their interest rate will be and get a check good for any new car, not just one sold by a particular dealer. "We give them not just a better rate but we empower them to go into the dealership as a cash buyer," Reed said.

At Capital One and at E-Loan, another major player in online finance, the application processes are similar and seem simple. E-Loan says on its Web site, www.eloan.com, that it charges no application fee and that it offers loans for new and used autos and motorcycles as well as auto refinancing.

One company's security

E-Loan attempts to reassure prospective customers worried about security, saying the information submitted in the application is encrypted for transmission and then stored with what E-Loan calls "industry-leading security" on its servers. The company also says it maintains a "rigorous" privacy policy and that it contracts for regular, independent audits of its processes and systems.

Like Capital One, E-Loan promises an approval or rejection within 15 minutes of submission of a purchase or refinance application, if it was submitted during its business hours. Those approved get a "PowerCheck" - by mail or by overnight delivery for a fee - that can be used at any licensed dealer authorized by a state's department of motor vehicles to sell new or used vehicles. Also included is paperwork that has to be signed and returned.

E-Loan says it can find financing for consumers with poor credit. And it says all E-Loan auto loan products have no early payoff or prepayment penalties.

On the other hand, the automobile information Web site Edmunds.com argues that it makes more sense in many cases to let the dealer arrange the loan - with the caution that loans, like cars, often are "marked up" to increase dealer profits. According to Edmunds, "Sometimes, the manufacturer offers to loan money at exceptionally low interest rates such as 2.9 or even 0.9 percent. If you can qualify for these special programs, you should take advantage of them, though they often mean reduced payment periods such as 24 or 36 months."

If you want to take advantage of reduced rates offered by General Motors, Ford, Chrysler or other automakers through their own credit arms, you have no choice but to let the dealer handle the paperwork.

And a lower interest rate is the objective of shopping around for a loan, whether you do it in person, by telephone or on the Internet.

As Edmunds points out in a primer on the subject (at www.edmunds.com/advice/fi

nance/articles/46724/article

.html) that's worth reading if you're new to the auto buying game: "While 1 percentage point might not seem like much, applied to a five-year loan it can be significant."

One point can cost a lot

Edmunds gives this example: On a $20,000 auto loan at 9 percent for five years, you would pay $415.17 a month. But if you financed the $20,000 at 7 percent, you would only pay $396.02 a month - a savings of $1,149 for the five-year period.

But Capital One points out that it sometimes is better to take the cash rebate alternative to the manufacturer's cut- rate financing.

"Special rate programs can be very attractive if they are offered for the vehicle that you want and have the appropriate terms," Capitol One says on its Web site. "However, sometimes the loan terms are restrictive and you may desire different terms."

The consumer federation's Gillis maintains, however, that most consumers can do better most of the time by shopping for financing on their own.

Capital One has a two-page application form that seems simple on its Web site, www.capital

one.com/autoloans. "Once approved," it says, "qualified customers receive a no-obligation Blank Check, which works like a personal check and can be used to buy a new or used car or motorcycle, refinance or even buy out a lease."