Financing a Vehicle – Tips and Pointers
When car shopping, we usually have the option of either buying the car directly for full price, or financing it over a specified period of time. While there’s not much confusion in directly buying the car, as the process is pretty much like buying anything else, the latter option — financing —is slightly more complicated. However, we’re here to help! Here are some tips and pointers on the financing process for you to consider:
Before going to a dealership, you should do research on the different financing options to help ensure that you don’t get caught off-guard. There are two main types:
- Direct Lending: You get a loan directly from a bank, finance company, or credit union. Over a period of time, you will pay the amount financed plus a finance charge. Once you enter a contract with a dealership to buy a car, you will use the loan from the lender.
- Dealership Financing: You get financing through the dealership. In this option, you still pay the amount financed plus a finance charge over a period of time, but you will pay this fee directly to the dealer. The dealer may retain the contract, or may sell it to a bank or a finance company — an assignee — that services the account and collects your payments.
- Determine the amount you want to borrow: First decide the amount of money you can afford to spend. Once you’ve done so, use a payment calculator to measure the affordability of your vehicle purchase.
- Decide the length of loan you want: Most loans run between five and six years, but longer ones are available; the longer term you choose, the less you have to pay each time, but the more you’ll end up paying at the end.
- Don’t jump over your price range: Choose something that’s within your budget. Don’t try to over-extend yourself financially with a down payment or with other expenses.
- Find out your credit score: Obviously, the higher your credit score, the better the financing rate you can get; have it printed out and ready for inspection.
- Look around and weigh your options as much as you can: Chances are the more you compare, the more likely you’ll be able to find a better deal; car shopping is a stressful process that requires a lot of patience, especially if you want a good deal, so please try not to rush.
Are You Ready to Buy a Car?
In conclusion, to get a good deal, you’ll have to be as prepared as you can possibly be; try to avoid any surprise factors. Also, stay on the active end and not the passive end! Have fun car shopping and stay safe on the road!