What Kind of Car Financing is Available to You at a Dealership?
We have a tendency to get so excited about trying out a new car that it’s easy to neglect fully thinking through our financing options. You’re so excited about that hot new coupe you’ve been eyeing for the past year, but then you get to thinking, “Wait a minute? How am I going to pay for this?” So you leave it up to the car dealer to tell you how you can pay them for the car you bought. Not so fast — let’s see what financing and loan options are actually available to you first so you can ensure that you’re getting the best deal on your purchase.
Types of Car Financing
Car dealerships always have financing options, but since they control the financing, they can also dictate higher rates. While financing through a dealer is the most convenient option, it’s not necessarily the cheapest. If their prices are reasonable, you may want to consider their financing. However, there are other options available to you.
Personal loans offer a very flexible option. You can often find these at your local bank. Their interest rates are usually some of the lowest around. Plus, your bank often knows your financial habits better than you do. Secure and unsecure loans are available, but secure loans last much longer. If you plan to use a personal loan for your new car purchase, be sure to get pre-approval before walking onto a car lot.
Home Equity Loans are another option, but are highly risky. You can borrow against the equity of your house to finance the loan. However, if you don’t keep up the payments, you risk losing your home and having it repossessed. This is an option for homeowners, but is not typically recommended.
Leasing is an option not many people think of when buying a new car. It’s sort of like renting your car for a long period of time. Leases usually require some initial deposit, often around $2,000 or so. However, you only have to pay for using the car each month, usually at low rates. Leasing is best if you plan on changing out your car for a new one every few years. However, with a lease you’re required to get full insurance coverage because technically the car does not belong to you, and depending on the dealer/manufacturer, a few other restrictions may apply. Be sure you also understand your consumer rights as a borrower.
This overview of your financing options should help you consider the best decision for you when you decide to buy your next car. You can click her for more car purchasing tips.
July 22, 2012 by Jamie Rettig