Wednesday, 13 November 2013

Financing Your Car without Breaking Your Finances



















Whether it is a new or used car you are looking for, the issue of paying for it can always end up breaking your bank. The money may not even be fully coming from your bank at the time of purchase, but you usually end up feeling it later on. There really isn't any great way of paying for a car, but the best possible option is always with cash, fully up front and that’s that. Unfortunately the chances of being able to obtain the amount of cash you likely will need is slim, in fact most people don’t ever pay for a car in full straight from their pocket.
So with your other options left, is there really a way to finance that car without completely destroying your finances, here and now, or even later down the line?

Your Options for Financing


There are quite a few ways you can get loans, or extend your payment time, or set up a payment plan to pay off the car. The main ones are:
  • Dealership: The dealership is always happy to offer this option to anyone.
  • Your Bank: So long as you have the Collateral, or good enough Credit.
  • Financial Institution or Credit Union: There is bound to be one that will help anyone.
  • Home Equity: If you own a home, but you are also linking your home and car.
  • Acquaintance: For those with moneybag friends or family whom are willing to help.
Each one of these options will have their good qualities and their bad ones. Dealerships are right there and ready to help, but they will also pressure you to add on things that you don’t need. With Banks you can’t just on the fly set them up, and usually require a few weeks if not longer. Financial institutions could be a risk if you are handling them online, since there are scams for that. Borrowing through your home, also puts your home at risk, and usually your car with it. Personal loans from a friend could damage a relationship if issues arise.
On the upside, credit unions and dealerships are quick and happy to take care of a lot of the work for you. Banks will provide excess information like informing you if you are paying too much for the car. Home equity gives you some tax deductions, and friends could give you the greatest break in terms of interest.
When it comes down to the options though, if you can pull for it, a personal loan from a friend is likely to be the most worth it and provide the easiest assistance. A bank would fall next and be the safest, but only if you even have that option (poor credit puts you out usually). After that it fluctuates. If you have a home and are willing to tie them together that’s the best option, if you don’t a credit union and dealership are about the same, except the credit union gives you what you need, a dealership will try to up-sell you for more than you need.


The Costs for Financing


The biggest cost you’ll see is from interest rates. This is why borrowing from a friend can be the least costly, thanks to a personal contract being set up and in some cases friends are happy to loan the money and expect the same amount back, which is the best interest rate you’ll get anywhere.

For every other option, your interest rate may not necessarily equal the value you might have seen on a car commercial. Those are averages for a working class middle-aged white man. The interest rate will be largely based on your credit history and score, what type of car you are getting, whether it is new or used, the length of time it takes to pay off the loan, where you are in the world, what your gender is, and a number of other factors such as where you are getting the loan from.

The dealership is likely to be the one to provide you with the most options in terms of your interest rates and how to handle the loan. You’ll find ones like 0% APR, or Rebates to go with it, or maybe even some special deal they happen to have going for that day only, you lucky devil.

All of these have extra conditions you aren't made aware of at first. 0% APR usually requires a high enough credit that could have gotten you a loan from the bank, and that it is always for a car that is already on the lot, and almost always ends up being more in cost in the long run compared to a cash rebate that most dealerships will offer.

When it comes down to it, you have a lot of choices to make, and buying a new or used car is not something to take lightly or on the fly. It’s a big purchase, even if most of it will be a loan for you, and that means you need to pay attention to what it is you are having to pay for. Pay attention to dealerships trying to mark you up for things like car prep, or any tactics that are meant to raise the price on you after you have the car like Spot Delivery.
If you have any troubles, don’t be afraid to find someone (especially a friend) who might know a bit more about finances, and the way loans should work.

Erin Patrick is a car enthusiast and has been associated with the automobile finance industry for nearly 10 years. She enjoys writing on behalf of Stratton and helping consumers and businesses alike find the best car finance available.

The above article has posted by Amy Lewis, owner of the finance corner. For more details about Amy you can visit her social media profiles in below mentioned urls: