Auto Finance
Often the salesmen at any auto dealership agency would ask you as to how would you fin`ance your new automobile. The query at times is confusing as auto finance would sometimes also mean that the dealership itself would provide you with the loan or would give you the automobile on lease.
Even though auto finance are available with the bank and you can get a loan easily but still there are a number of people who opt for getting finance from the dealer itself. Getting finance from the dealer would simply mean that you walk into the place sign the credit application finish a few formalities and then move out with the vehicle. However bearing in mind that the amount has to be paid. This is a good option as you can get your vehicle either on weekends or on days when the banks and the credit unions are closed.
However, getting finance from the dealer is easier to say than doing it practically. Before you decide on taking the finance from the dealer remember that you would have to pay more as compared to an auto loan taken from a bank. The amount would depend a lot on your credit rating. If you have an excellent credit score then you can get the finance at comparative rates as the bank offers, besides you can also be eligible for some of the special programs offered by the dealer which would lower your costs. But in case you have a bad credit rating or no credit then you would be charged a higher interest rate.
So when the salesperson asks you how are you going to finance your automobile you can give him any of the three answers:
You would buy the automobile
You would take the automobile on lease
You would pay cash for the automobile.
Now let us have a detailed look at all these three financing options.
Buying the automobile: In case you wish to buy the automobile and you would like to get the finance from the dealer then you are required to fill in a credit application. Once you have filled the credit application it is assessed and depending on your credit score the finance is arranged for you from one of the lenders associated with the dealer. The loan would be based on the negotiated price of the automobile and the other expenses like sales tax, the licensing fees and the title. Financing an automobile is a big thing and most of the manufacturers have their own lending companies.
While considering this option the dealer would ask you when would you like to pay off the loan on the automobile Usually these loans have a repayment period of 3-5 years. It however depends on you as to how much time do you want to extend the loan. Depending on the longer repayment term the monthly payments would be lower. The longer the repayment term the lower would be your monthly payments. Besides the repayment period the monthly payments also depend on the interest rate that you are paying and the amount of down payment that you have given. When taking auto finance from a dealer you should remember that the dealership would always ask for a down payment.
Also remember that while you are paying off the loan the lending institution is in possession with the title of the automobile. Once you complete all the payments then you can get the automobile title.
Leasing the automobile: When you decide to lease the automobile you would again have to fill out the credit application. Again based on your credit score and the duration of auto lease you desire the dealer would arrange for a lease for you. When taking the automobile on lease you should decide on how long you would like to take. It is usually advised that you take it for three years. Besides the duration you should also decide on the amount that you would like to pay as the upfront. Usually experts recommend that you should pay a small amount as the upfront to start the lease. You should tell the dealer that you would pay only the drive off fees.
With the leasing option you can drive a car up to a limited number of miles a year. If you want to derive more than the prescribed amount then you should ask the dealer to extend the amount. But remember when you opt for the extra mile you would have to pay more amount as the monthly payment. The contract that you sign for leasing contains a residual amount for the vehicle. Once you have done all the payments you can buy the vehicle at the residual price.
Paying Cash: When you decide on paying cash for the vehicle it is a straight deal. You would have negotiated with the dealer and then give him a check for the amount. When paying cash you are free from paying the down payment, the interest rates and the monthly payments involved while taking a lease or finance from the dealer. When you negotiate in this way the dealership cannot mask the actual cost of the vehicle. If you dont have enough cash then you can always take a loan from any lending institution or bank. There are a number of banks that would readily sponsor the new automobile.
These are some of the ways by which you can get finance for your automobile. So before you decide on the type of auto finance you would opt for have a look at your financial condition and verify your credit report.
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