When buying a car, it is always important to know your options. Financing is one option that can help you purchase your new car. We share more details about what this means.
What Is Car Financing?
When you finance a car, a financial institution such as a credit union lends you the money you need to purchase the car. When choosing this option, you usually need to put down a down payment equivalent to a percentage of the loan amount, and then you would repay the rest of your vehicle’s purchase price over a set period of time (the loan term) based on what is agreed upon. You would then make regular monthly payments to pay off this loan amount.
Usually, borrowers will have to pay interest on the loan, as well as additional fees for processing and issuing the loan. The car itself acts as collateral on the loan, which means that the lender has the right to take (repossess) your car if you are not able to keep up with your payments.
Who Offers Car Financing?
You can get auto financing through a variety of financial institutions. Credit unions and other financial institutions such as a bank are common places to get car loans. If you have a general idea of how much the car you want will cost, you can contact your credit union or bank and get pre-approved for a loan. The financial institution will give you a letter confirming the amount you can borrow and the interest rate.
Another place that offers financing is the auto dealership itself. Dealerships may arrange financing for you through outside lenders. However, this may cost more than getting a loan on your own, since dealerships generally build some profit for themselves into the cost.
Some dealerships offer their own in-house financing. Known as “buy here, pay here” financing. If your dealership tries to offer this type of financing, you should consider whether this is a good option. Frequently, these loans are designed for people with poor credit, so interest rates and down payment requirements tend to be very high.
Once you find your dream car, it may be difficult to wait. However, by getting pre-approved beforehand, it gives you more leverage to get the best rate on an auto loan without being locked into a loan that doesn’t give you the best benefits. With a pre-approved loan, you can negotiate for better terms and get the right auto loan for your needs.
Do you need help financing your car? Let us know!
Let Camino help you. We want our members to find the best option that works for their needs. We offer competitive auto loan rates. Please go online at caminofcu.org, give us a call at 800-835-3400 to speak with one of our Member Advisors, or contact us for more information.