Auto Financing - Dabbler.com

Auto Financing

Are you thinking about leasing or purchasing a new or used vehicle? Whether you’re a first-time car buyer or you’ve had many cars over the years, it’s important to know your auto financing options.

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Auto Financing

When it comes to financing the purchase of a vehicle, you need to consider the type of financing that best suits your needs, budget, and financial status. Car buyers have two options: direct lending, usually from a bank or other financial institution, or dealership financing.

With direct lending, your car loan comes from a bank, credit union, or other lending institution. You sign a contract agreeing to pay the amount financed, plus any interest or charges. You will also sign a contract with the dealership you’ll be purchasing the car from. By entering into a contract with the dealership, you’re agreeing to use the direct lending loan to pay the price of the vehicle.

On the other hand, with dealership financing, the purchase of the vehicle is financed by the dealership you buy it from. In this case, the contract includes details regarding the repayment of the loan and any additional fees or interest charges from the dealership. Dealers sometimes retain these contracts, but most of the time they sell them to a financial institution to service the agreement.

Car Loans

Car loans are offered by both financial institutions and car dealerships. There are advantages and disadvantages to both options. When you go to a bank or other financial institution, such as a credit union, for a car loan, you have the opportunity to compare rates from several different lenders before you buy. Though it may take more time to research rates and talk about credit terms with more than one lender, in doing so you may be able to get a better deal when it comes to loan fees and interest. In addition, when you get pre-approved for financing before you go out to shop around for a vehicle, you can base your purchase on the credit rate and other terms. Dealership financing offers several advantages, including convenience, flexibility, and incentive-based programs. 

Bad Credit

Do you have bad credit? You can find out by checking your credit report before you start shopping for a car. If you have a bad credit rating, you may be denied auto financing by either a bank or a dealership. Though many lenders advertise car loans for people who have no credit or bad credit, you should assess your options carefully before proceeding. Shopping around is crucial in order to get a rate that doesn’t break your monthly budget—you don’t want to take on more than you can handle. Interest rates for borrows who have good credit ranges between 4-5% but bad credit borrowers can pay upwards of 13% interest. Having the attitude that you’ll take a loan at any cost can be dangerous for your wallet.  

New or Used Vehicles

When it comes to auto financing, one of the most common questions is whether it’s a better investment to buy a slightly used car versus a new one. The truth is that cars depreciate significantly during their first two years of use, and less during the years that follow. Buying a car that is slightly used is often the option that will give you the most bang for your buck as far as financing is concerned. With that said, new or leased vehicles tend to have lower maintenance costs.

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