A Primer On Automobile Financing

It is a little known fact that car dealers generally make more money out of selling extended warranties, accessories, and the like than they do out of selling the car. More often than not, once you’ve managed to argue your way to a reasonable price with the dealership’s representative, the guy in charge of automobile financing will try to sell you on things that they think you would be interested in. For the most part, automobile financing is a necessary evil because the average Joe just doesn’t have the money to pay for the car in cash, thus avoiding the complications of debt, interest rates, and the like. In such a situation, the options are either purchasing the car through some sort of financing agreement or buying through a lease.

Automobile financing can be obtained from a variety of sources. One of the most obvious sources would be the very same dealership that one bought the car from. The dealership usually offers financing fast and quick, and clear terms. However, one will have to put up with pushy attempts at selling add-ons like an extended warranty and potentially similar rates. Some dealerships also have higher interest rates during the first few months that can be potentially difficult for buyers. There is also very high pressure on the officers in charge of the dealership and financing, which then translates to added pushiness in selling customers assorted extras while discussing the details of the financing agreement with them.

If you are not sure or if you feel uncomfortable arranging a deal with the dealership, automobile financing is also available from a credit union or bank. The rates, when compared with a dealership, are more varied and more attractive in a bank. The interests on these loans are often spread out for the duration of the financing period, rather than lumped at the start or near the end. The bank also does not need to push add-ons for your purchase. Another feature that many find useful is the fact that the bank can inform you if they believe that you are paying more money than the car is actually worth. However, one sacrifices the convenience of speed when taking this option. A buyer can’t have the financing agreement set up over the weekend or overnight with a bank, unlike when arranged with a credit union.

A third option would be to go for an online company for your automobile financing needs. While the service is far from personal, the online company is, by far, the easiest option. An online company also has less qualms than a dealership or bank, if you don’t have a good credit rating. In addition, the agreement is quickly set up and the terms are competitive and varied, giving the buyer options to choose from in how they want their financing plan set up. One caveat about this option, however, is the fact that there are scams out there that seek to take advantage of car buyers with exceedingly good deals on financing. If one is not wary, one could easily fall into their trap.

Regardless of what method one chooses to use in automobile financing, there are risks to be considered. While there are other ways to go about the process, the three presented above are the most common and the most accessible for the average Joe. As with any other financial venture, automobile financing is not to be taken lightly and should be viewed as different for every situation. Some factors to take into account when considering what option to go with are one’s credit rating, the distribution of interest, the occasional discount based on geographic location, and factory rebates provided by the manufacturer.

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