Financing a Vehicle
The Basics of Financing a Vehicle
When looking to buy a new vehicle, many people do not have the option of paying with cash in full and instead rely on various financing options in order to secure payment. However, this decision can be as important as choosing the right vehicle, even more so – securing the wrong kind of loan can have financial repercussions for years to come. That is why it is important to pay a lot of consideration to this before making a decision.
Finding the Right Financing
There will be a lot of differences between the various offers that banks will have for you. Your bank is a great place to start when looking to secure financing for a new car, but it should not be the only place, by any means. You can get a pretty accurate estimate from all the banks in your area online. There are likely to be many different aspects of the loan which determine how beneficial it is but, for simplicity purposes, the annual percentage rate (APR) is a good measuring stick to use in order to determine the quality of a loan.
If not banks, credit unions are also a viable choice and they usually have better rates than banks. Online lenders also offer a variety of contract lengths with good rates and most of these websites have calculators that make it easy for you to find out the exact cost of financing a loan.
There is also the option of using financing directly from the dealer. The biggest problem here is that these are sometimes the worst possible options since the dealer acts simply as a middleman. However, it is also possible for the dealer to have a special deal in place with one or more lenders which allows him to actually provide you with a better deal than the banks. Even so, there are a few caveats for being eligible for this kind of deal: they are usually available only on short-term leases of about three years or less and they require you to have an excellent credit rating.
Determining the interest rate
Once you are settled on a financing source, you should focus on the interest rate. This will vary based on several factors such as your credit rating and the length of the contract. While a longer contract might seem like the best option, it will end up costing you the most, overall, and also ties you to the car legally, not being able to sell it or use it as a trade-in while there are still payments to be made.