You have plenty of options to consider when it comes to paying for a new car purchase. If you’re dealing with a car dealership, there will be staff on hand to help guide you through this process. They will have financing options too which may or may not represent a great deal for your purchase. The key to securing good financing is to do your research well before you arrive at the dealership and fall in love with a car. You can learn about car makes and models, estimate values and find dealerships in your area at Cars.com.
Some people think the best way to pay for a new vehicle is in cash. Not everyone has $20,000 or more laying around to pay in cash. But, financial experts highly recommend saving until you do and only buying the car you want at that point. Surprisingly, there are pros and cons to this arrangement. On the pro side, you’ll save thousands of dollars in interest charges that you would otherwise pay out over the life of the car loan you choose. All interest is built into the beginning of a car loan. This means that in your monthly payments, a greater portion of the payment pays interest to the financing company for the first couple of years. As you progress through the financing period, this balance shifts as the total interest is paid and more of the monthly payment goes toward paying the principle on the loan. The con is that you won’t get any credit on your credit report for paying your monthly car note on time. On-time payments for big ticket items like cars and houses earn big points on your credit history.
If cash isn’t an option, then you’ll have to choose how to finance your purchase. If you have fairly good credit, you can probably go into a bank with which you have a relationship and ask to be considered for a car loan. There are also credit unions and large national banks that offer good rates on car loans too. It pays to have a financing option in your pocket when you walk into a dealership.
As mentioned before, the dealership will also have access to financing options. If the terms of these options beat those attached to the financing you secured before showing up to the dealership, you’re free to use whichever agreement works best. Just because you applied with a specific bank of finance company for the loan doesn’t mean you have to end up using them.