Given that buying a car is a very important purchase, and usually the second most expensive one after buying a home, people have to take many things into consideration and think carefully about how much you can afford to pay for a new car, by taking into account the overall ownership costs, including insurance, maintenance, fuel costs, and deprecation, in addition to the purchase price.
After you have decided what car you want to buy, the first thing you should do is figure out how to finance the purchase. There are various financing options at your disposal, and each of them has its advantages and disadvantages, so you have to make sure you choose the one that is right for you and fits within your budget. To do that, you need to know the differences between dealer and bank vehicle financing, and which factors are important for determining your interest rates. DMV.com’s new auto financing section explains everything that has to do with financing a car and what you can do to make sure you get a good car loan.
Although many car buyers choose to get a dealer-financed loan, as a more convenient option, it doesn’t mean that it’s the best financing solution for everyone, given that it usually comes with higher rates than loans from banks or credit unions. That’s why you should compare the rates from different providers before you decide which of them meets your needs the best. You can compare the financing options offered by banks, car dealers, online lenders, credit unions, or manufacturers, and see which of them has the most competitive rates. This will help you determine what the most convenient financing source for you is.
There are some significant differences in the terms, interest rates, and down payments of different types of auto loans, depending on what institution you are getting the loan at. Interest rates involved in car dealer financing are often higher than rates offered by other lenders, because dealerships offer loans they obtain from financial institutions with marked up rates. Getting a loan from a bank or a credit union is often one of the best options for many car buyers, as it usually has better interest rates, lower monthly rates, and flexibility in terms.
If you don’t intend to keep your new car for more than 3-4 years, than leasing might be a better option for you, rather than purchasing. The main advantage of leasing is that you probably won’t have to make a down payment, and your monthly payments will likely be lower than the payments you would have to make if you decide to buy a car, but the fact that you won’t be able to sell your car after the lease term ends is arguably the biggest downside of this option.
Finally, no matter whether you decide to lease or finance your car, and regardless of which financing option you choose, you have to be aware that maintaining a good credit score is the most significant factor that can help you get a good loan, so obtaining a credit report before going to a financial institution and applying for a loan is always recommended.