Best Finance Options for Car Loans

Finance for car purchases falls into two categories: lease and loan. Unless you are able to write a check for the purchase price, when you want a new car, financing is for you. Options abound when you are looking to finance. For instance, many dealers offer car financing, often through manufacturers’ lending agencies. In addition, there are numerous third party lenders that make loans available to qualified borrowers. It is a good idea to familiarize yourself with the choices you have so you can make the best decision and get the best deal.

Dealer Finance

One of the most convenient means of car finance is through the dealer. Once you decide what make of car you want, you go to the dealership, spend some time test driving and picking out a model, then you step in to see the finance agent. With this person you will begin the financing process. Obviously, this method saves you time because you only make one stop. However, keep some things in mind. By doing this, you are not using competition to your advantage. You could be getting a much better deal somewhere else. Also, dealer finance agents typically add up to 2.5% to your approved interest rate as pure profit for them. They don’t all do this, but it is common. So even if you’re approved for a great, low rate, you might be paying more than you deserve. On the upside, only at a dealership will you benefit from manufacturers’ incentives and rebates which could lower the car’s price further.

Third Party Finance

Third party finance specialists are found everywhere, especially online. The benefits of opting for this type of financing are that you encourage competition because you can get quotes from as many as you like, you get the interest rate you have been approved for, and you are approved before you ever set foot in a dealership. This last benefit gives you some leverage when you go to buy the car. You get the interest rate you should because there is no chance for the dealer to mark it up. Because there are so many choices, you have an incentive to shop for the best rate you can get. Third party finance gives you this incentive.

Banks and Credit Unions

Banks and credit unions are other financing options, albeit more traditional ones. Dealerships have arrangements with finance agents from certain banks, but the benefit of going yourself is pre-approval and getting a competitive market interest rate. Banks and credit unions will be more stringent with their credit requirements, and they make take longer for final approval, but it is an option nonetheless.

There are several avenues you can take for securing car finance. Banks and credit unions, third party lenders and dealerships are all in the business of car finance and should each be looked at separately. Informing yourself of all your options is your best bet for getting the lowest interest rate and the most favorable terms for your car finance loan. Knowledge is power when you are financing a car, so take the time to acquire as much as you can.