Understanding the basics of vehicle financing is very important. Before you even set foot in the dealership, it’s vital to come prepared with a personal financing plan, so that the dealer can help you make the best possible deal for your family and your budget. Below, we’ve put together a few vehicle financing tips to help your car buying experience be fun and effective.
Financing Through the Dealership vs Direct Lending
First and foremost, shoppers looking for new cars in Phoenix will find that there are two main methods of vehicle financing: direct lending and financing through the dealership. Direct lending has its benefits, but for most shoppers, financing through the dealership tends to be the better choice. Not only do you get the added convenience of having the dealership prepare and file your documentation, you also get more financing options, thanks to relationships that the dealer has made with various banks and institutions.
Another big plus is taking advantage of special dealer incentive programs that come straight from the manufactures. These incentives can help you access everything from a lower interest rate to lower monthly payments.
How Much Car Can You Afford?
One of the main causes of stress during the financing portion of car buying is a buyer trying to take home a car or SUV that is out of their price range. Before coming into the dealership, be sure to make a monthly spending plan to find out exactly how much you can spare each month for a new or used car. Once you have that number down, you and your salesperson can better negotiate a price that both parties will find agreeable.
Your Credit Score Is Very Important
The importance of your credit score cannot be overstated. That’s why we recommend asking your salesperson to pull it for you when you finally decide on the car you want. Many people might pull their scores beforehand (which isn’t a bad idea), but dealerships can pull a more accurate credit score that will affect your overall financing.
Short-Term vs Long-Term Loans
The length of your loan term is highly important in determining how much your monthly payments will be and how much interest you’ll pay over time. Most experts recommend choosing the shortest term limit that you can afford, as you’ll end up paying more in interest if you choose to extend your loan more than 72 months. Make this a part of your monthly spending plan above to determine how many months you can feasibly finance the vehicle.
