Car owners generally make buying a new or used car a rare occurrence, happening only once a decade or so. This makes it an unpracticed process, somewhat unfamiliar and even discomforting, especially when it comes to securing financing. As your Honest Car Dealer, we aim to give you the tools to make the best decisions in the car-buying process, namely a distinct sense of clarity. So, here’s our quick and easy overview of financing that should provide some help when searching for your next car.
Where Should I Finance From?
In general, there are two options for financing: the dealership or the bank. A credit union makes for a third, but rare, choice, but we’ll group it with banks here. However, if you have the choice between a credit union and a bank, the credit union is often the way to go as they are usually more flexible on loan rates. Yet we usually suggest our drivers finance directly from the dealership, and here are a couple of reasons why:
- Dealership financing is negotiable, with reduced APRs often available by adding on benefits like extended warranties.
- 0% APR promotional finance rates can be found at many different auto dealerships throughout the year—you are not likely to find a 0% APR loan directly from a bank.
What About My Credit Rating?
The higher the credit score you have, the better, but believe it or not, the quality of your credit rating will very rarely prevent you from securing auto financing. What it does determine is the kind of financing you are eligible for. A lower credit score often means a higher APR and can disqualify drivers from some promotional offers.
The good news is that making regular payments on an auto loan can significantly boost your credit rating. Coupled with the fact that car loans often have very low interest rates, it’s also one of the easiest ways to improve your credit.
If your credit rating is too low for financing or you want a better APR, you may need to put down a higher down payment or add a cosigner. While a cosigner may not be the worst idea on student loans, it can be more risky on a car. If you are cosigning or are looking for a cosigner, make sure that everyone is fully aware of the terms agreed upon.
What if I’m Unsure About Financing?
The bottom line of auto financing is that you always have the power to walk away. Not only can this be a useful negotiating tool, but it’s a good reminder to keep yourself from feeling obligated to leave the dealership with a vehicle. If you aren’t happy with the offers being presented to you, you can and should walk out, either to find a better dealership or visit a bank or credit union for alternative financing options.
