Best Way to Financing When Buying a Car

Autos Financing with Smart Ways

      Buying a car is not an easy matter. From buying outright to using finance, there are plenty of options. You should also think about operating costs. A car can be the second most expensive object you will buy – after your house. So, it is important to make sure you choose the best way to buy a car for you.

One of the biggest mistakes that people make when buying a new car is forgetting to include the car financing rate in the overall price.

For example, if you bought a brand-new car, the difference between the "sticker price" and the dealer's invoice price (the amount the dealer paid for the car) would be about $1,500. If you negotiate well, you should save $1,000 or more for a car. If you then financed the car for 4 years with a 6% no down payment, you would be paying more than $2,000 in interest. Financing the car for 3 years at 4% with a $1,500 down payment, however, can save you over $1,000.

Car Financing Options

You have 2 autos financing options: direct loan and dealer finance.

1. Direct loans: You borrow cash from a bank, credit union, or car finance company. In a loan, you agree to pay the financed amount, and finance fees, over a certain period. Once you're ready to buy a car from a dealer, you can use this loan to pay it off.

2. Dealer financing: You apply for financing through the dealer. You and the car dealer enter into a contract under which you purchase the car, and agree to pay the financed amount and finance fees for a specified period. Dealers usually sell contracts to banks, credit unions, or auto finance companies that will service your account and collect your payments. (consumer.ftc.gov)

Cash or savings

If you can afford to pay for your new vehicle outright, then you should do so, and in some cases, it's the cheapest method. However, if buying a car ties up all of your money, or a large part of your cash reserves, it can throw you into a panic in the event of an emergency. Buying with cash is a great way to ensure that you stick to whatever budget you've set yourself and that you don't make financial commitments that are bigger than you can afford. It also means that your commitment to pay for the car is finalized on the day you take ownership.

7 Smart Methods to Finance Your Next Car.

Review your credit score before placing a foot in the dealership

Paying off your debts and making payments on time can enhance your credit score over time, and a proper credit score can decrease the quantity of interest you’ll pay on your car loan.

Your credit score can also affect the type of auto loan you can get. Having a precise credit score can make you eligible for some of the upper-tier auto loans and a greater loan amount.

Personal loans

When you need to get a loan to buy a car, one of the alternatives is a personal loan. What's special about personal loans in most cases is that they are without collateral, which means you don't have any collateral attached to the money you borrow. Plus, the funds you borrow can be used for whatever you like to buy.

Personal loans are usually the cheapest option when it comes to a car financing, as long as you have a good credit history. Many car buyers make the mistake of paying for the car with their credit card, or automatically think the financial plans offered by dealers are a good option. However, personal loans almost always offer much better fees – not to mention they offer great convenience in this case, these can be arranged online, with minimal effort on your part.

Compare Car Dealer finance Towards Lender Rates

In the joy of buying a new car, some people forget one very important little detail: how exactly to pay for that new set of wheels.

Unless you have a spare $20k in your back pocket, there are two options: dealer financing or a car loan from a lender.

Dealer financing is when dealers contact their financial institution or lender of choice and help arrange a loan for your car purchase. They make all the arrangements, while you are doing very little. That sounds fun!

Another alternative is when you (the car buyer) apply for a car loan from a lender such as loan.com.au. 

You arrange the loan details yourself and use the cash to buy a car from the dealer.

Dealer financing may also seem like a no-brainer, as it's more convenient, but dealers can also mark up monthly payments to pocket a profit. Some dealers provide their interest rates which can be a markup on bank rates.

Mortgages

A mortgage is often a great way to finance a vehicle. The interest rate on your home loan is much lower than most auto loans, and by actually restructuring your existing loan, you avoid all the work associated with applying for a new loan. However, keep this in mind: the loan term plays a large role in identifying the overall cost of the loan.

If you pay back the amount borrowed for the vehicle for 10 years (120 months), it will cost many times the price, if you take out a 36-month car loan at an even five percent higher interest rate. The point is, that if you use your home loan to pay for a car purchase, you should aim to repay the loan in less than forty-eight months.