Using Financing to Buy a Car
At times, you may want to own a car but fall short of the required amount of money to buy your dream car. This is where car financing becomes useful. But how much does a car have to be to finance? Below, we take a look at the available car finance options:
Direct lending involves directly borrowing money from a credit union, bank, or credit union. You consent to repay the amount loaned to you together with the interest over a stated period. The money from the lender is used to pay for your dream car. It is advisable that you do comparison shopping among lenders before committing to one, to help you establish who has the best loan terms. Besides, it would help if you got preapproval for financing before shopping for a car to help you know the terms of the loan, including the length of the term, annual percentage rate, and maximum amount.
Dealership financing is where you and the car dealer sign a contract to have you buy a car and be allowed to make payments for it over a specified period. The total amount includes the cost of the car plus the finance charge. The dealer then sells the contract to a finance company or a bank to have the account serviced. The payments latter collects payments. Dealership financing has the following advantages:
Convenience: Car financing is done under a single roof and their hours of operation may be extended late into the evening.
Special programs: At times, dealerships may offer buyers manufacturer-sponsored incentives such as low prices, larger down payment, among others. It is vital to note that such incentives may only apply to clients with a strong credit rating.
Multiple financing options: Dealers may offer buyers a broad range of financing options since they have contacts with many finance companies and banks.
Shopping for the Best Financing Deal
It is essential to remember that you are not just shopping for the car but also the financing. You should thus, negotiate the terms to help find a financing structure that is best suited to your needs. Have a thorough understanding of the costs and terms and conditions of each arrangement before signing a contract with a financier. For instance, creditors may offer long-term credit repayment period, resulting in low monthly payments, but may attract high-interest rates. Also, cars depreciate fast, and you may end up owing more to the bank compared to the value of your car.