What is So Good About Car Finance?
People have been using car financing to purchase both new and used vehicles for decades. It is probably one of the easiest ways to get you hands on a new car without having to spend half your life saving up for it. Car finance has made it possible for people that can’t save money but need a car as soon as possible to get the car they want in the shortest possible time period. There are many people who can afford to purchase a car outright but still opt for car finance simply because of the many advantages that auto finance has.
There are various types and kinds of auto finance each has its own perks and downsides however its imperative that you search for a car finance option that offers you the lowest interest rate possible. For people that have the money to purchase a car outright getting car finance means that they can save the money in an interest bearing account or put in an investment which will yield more money for them i.e. which will earn them a high ARP or annual percentage rate that what they are currently paying for their car. This means that they will end up with more money at the end of the month than they otherwise would if they purchased the car outright.
There are many dealerships which also offer car financing however the problem with getting car finance from a dealership is a high interest rate. Dealerships tend to offer the highest interest rate however they may be a good option for people with poor or bad credit since they have fairly lenient lending policies. In many cases it’s not actually the dealership which is extending the vehicle finance but a finance company which is working on the backend and gives the dealership a kickback from the financing business they provide to the company. This in turn benefits both the dealership as well as the person purchasing the car. This is why typically many dealerships will be unwilling to do business with people who are looking to pay for the vehicle in full. This is because this way they don’t make much of a profit and they just make the money which is built into selling the vehicle.
Deciding to opt for car finance is your personal decision but there are more perks associated with good car finance than drawbacks. This is why it’s recommended that if you need a car you start signing up for automobile finance right now.
Robert Worley has been a part of the car loan industry for many years and writes and publishes articles to help consumers better understand the car loans and bad credit car loans. Robert answers common questions consumers have about car credit in his articles and news posts.
Car Finance FAQ:
Question: Is a letter good enough car finance?
I just bought a car privately. With all the paper work was a letter from the finance company saying the final payment had been completed. Is this good enough proof?
Answer: No, the letter would indicate the loan was paid and there was no lien holder, but since cars are transferred from seller to buyer by means of a title, if you didn’t get a signed clear title, you haven’t bought a car yet. Go get either the title or your money back.
Question: Which would be better to do: Finance a car w/the dealership or get an auto loan from a bank?
I live in Texas, and have fair credit. How much do you think my interest rate would be?
Answer: Go to a bank and ask for pre-approval (they give you a blank check that has a maximum amount it can be cashed for). You will NEED a down payment! Then when you go to a dealership you can get a “cash price”. Much easier to negotiate on a price. You may end up paying less then the sticker price.
Question: Is there any chance you could finance a $23,000 car if you have no job?
But I am able to put down $13,000 and have good credit, well as in credit I mean I paid for a $14,000 car fully before and I payout yearly insurance? I’m not sure if that even matters for credit?
Answer: I’m sorry but that is a horrible idea. If you have no job, you must NOT get yourself into debt. You do not need a $23,000 car. You only need a $3,000 car. Get a cheap used car, get a job, and begin to budget your money.
Especially if it’s a NEW car. Never buy a NEW car unless you can truly afford it and really want it. Like, paid off house, fully funded emergency fund, retirement funded, etc.
Question: Buying a car, getting a loan to finance?
I am purchasing a 2010 Chevy Camaro. I am trading in my car for the new one. The dealership has tried getting a bank of theirs to finance me but I have little credit. I am now going through my bank (or at least trying). Since the dealership has already ran my credit about three times, will it effect the decision of the bank?
Answer: Their pulling your credit will affect your score. Generally a dealership pull drops your credit roughly 20 points, (each time). So you do want to be cautious about that. Hopefully you got your application in with your bank before the results show. Don’t give up though, credit is certainly tight but there are avenues to get financing regardless of your credit. Just be sure to compare offers and choose the best. You only really run into difficulty if you make the mistake of accepting the first offer that you get.
Question: When financing a car do you pay back the interest from the loan everytime you make a payment?
I plan to finance a car and I want to know whether I will be paying back the interest every month or only when I’m late or miss a payment like with a credit card.
Answer: Every time you make a monthly payment, some of your payment goes to interest, some goes to principle (which is the amt of the loan you originally took out). The monthly payment they give you factors in interest ALREADY. If you pay more than the monthly balance, it will eat at your principle more, essentially allowing you to pay off the loan quicker with less interest.
Question: When getting a car on finance do I need to get vri on it or is the dealer trying to rip me off?
Answer: No you don’t have to have VRi. You don’t have to have anything you don’t want. Just tell them, simple. Every Dealer has a duty of care to tell you about every benefit that is available to you so they are not trying to rip you off.
Question: Should I finance my first car?
I want to buy a car the summer before I start college but will not have saved but $2500 by then. I figured since I will have $750 a month after that if a dealership can let me pay a low monthly rate then I can afford it but everyone tells me no. Especially if I do it on a cheap car like a 2006 kia rio or 2003 Honda Civic, but Should I?
Answer: I did…but then again I didn’t have $2500 either. I think if you have that type of money you should buy your first car cash only, not financing. Not sure if you have to pay for college or not but save your money for other expenses you may have. $2500 can get you a pretty decent car.
Question: What happens to the car after it is written off by insurance?
My car was in an accident and the insurance company is telling me that the car will be a write off. It is still being financed but I have purchased GAP insurance through my bank when I re-financed the car. I am just curious as to who owns the car or gets possession of it if the GAP is covering the remaining balance of the loan? I would like to get the car back to sell for scrap in order to raise some money for a down payment towards another car.
Answer: You do not own the car as you financed it and still have outstanding payments, therefore you will have to pay the outstanding balance even if you no longer own the car, because it is a write off it will go to the scrapyard, don’t think you can buy it back, sorry for the bad news.