How to Finance a Car
Financing a New (Or New-to-You) Car
When it comes to financing and loans, people spend a lot of time talking about mortgages, personal loans, and even student loans. But what about auto loans? The majority of Americans will purchase a car at some point in their lives, and most people will buy or lease more than one over the course of their driving lifetime. And, since very few people can afford to pay cash outright for a new ride, that means you will likely need to navigate the waters of vehicle financing eventually. But where do you begin?
Securing a loan for a car, truck, or SUV can be a complicated process. Depending on if you're buying new, used, or leasing through a dealership or a private seller, the experience will be different. And the variables don't stop there. Do you have good or bad credit? Are you financing through the dealership or direct through a local bank? Before you start feeling overwhelmed, take a deep breath and learn more about your car buying options.
Before You Buy
Before you even step foot in a dealership, do your research and find out what you can afford. While you might have your heart set on the newest model of your favorite brand, a new car might be out of your price range. If you don't have cash saved up to pay for a new car outright, you need to be prepared for monthly payments. Create a budget and calculate how much you can allocate to a loan payment each month. Live with that budget for a while, setting the anticipated amount of the loan aside to make sure you can still afford your other expenses comfortably. Once you know how much you can pay monthly, you will have a better idea of the total price you should aim for.
Another piece of homework leading up to buying a new car is knowing your credit score. Getting approval from a lending agency, and securing a low-interest rate, will be much easier if you have a good credit score. Improving your credit score doesn't happen overnight, so this is a process you should start early. Always be mindful of what your credit score is and how your money management choices are affecting it. That way, when you're ready to take out a loan, your credit score will be ready too.
Leasing is becoming an increasingly popular option in the auto industry. Instead of paying the full price of a car, leases only require you to pay the sum of the depreciation of the vehicle's total value over the course of the loan, plus fees and interest. This can get you behind the wheel of a new car for significantly less than if you were to buy outright. However, it means that you don't own the car when the lease ends. You either have to purchase the car at its depreciated value or enter into a new lease.
Some people enjoy leasing, and it does come with certain benefits. For example, general maintenance is often covered by the leasing dealership at little to no cost. On the other hand, leases can come with unexpected fees. Most lease agreements include mileage restrictions, and many dealerships charge a small fee for every mile you go over. There can be cleaning fees when you return the vehicle at the end of the lease, and additional charges if the car shows signs of excessive wear and tear, as that decreases the total resale value of the car. Additional or more expensive insurance may be required, too.
Buying a Car
While buying a car does come at a higher price tag, there are also many rewards. You have something to show for your investment, and it gives you trade-in value for future auto purchases. There are no mile limitations, and you can use and abuse the vehicle as you see fit, which is especially appealing to families with children or pets. If you have decided that buying is the right choice for you, and you have done your research to find out what you can afford, it's time to source financing!
There are some trustworthy online lenders, but be sure to compare pricing to confirm you are getting a fair rate, and take extra care to avoid predatory lenders. Some major automakers offer their own financing, but while these loans sometimes come with special offers, they usually require purchasers to have excellent credit as well. Most dealerships also offer financing through partner banks. This is a popular option, and convenient for first-time buyers who need guidance through the process. Just be aware that dealerships might charge a percentage fee for acting as a liaison between you and the bank. Beware of dealerships offering dealer direct financing. They are often willing to give loans to customers with poor credit, but they reserve the right to repossess your car if you miss payments.
Last but not least, you can secure an auto loan through a local bank before you even head to a dealer. Auto loans provided by banks are great if you're looking for flexible buying options. You can get pre-approved for a loan amount before you go shopping, so you know exactly what you can afford. Unlike a dealership, banks can also provide an auto loan for a vehicle you are purchasing directly from a private seller.
No matter what stage you are at in your car buying journey, North Country Savings Bank can help. If you are ready to buy, stop in and speak with a Loan Expert about securing an auto loan. NCSB offers flexible loan terms, competitive rates, and even gives rate discounts to qualified buyers. Furthermore, making your monthly payments is easy! You can set payments up so they are automatically taken from your checking account. Don't let the complexities of auto financing keep you from your dream car. Stop into your local North Country Savings Bank today!