By: Admin / TextrOnline
Buying a new car is a tough decision, and you have to live with it for five or more years. Many people rush into this without exploring all of their financing options. In this blog, we will discuss two major sources of car financing and help you make the right decision.
The most straight forward method of car financing is taking financial assistance from the bank via a car loan. In general, you will get a pre-approval for the loan before you make your way to the dealer. However, this approval depends on several factors, such as credit history and your frequency of returning loans.
A bank might also take your active loans under consideration when lending more money. This is to ensure that your income is sufficient enough to pay back what you are demanding. Just think of it as a precautionary method banks use to safeguard their investment.
However, you need to be proactive when approaching a bank for car financing. First of all, you need to review your credit report to see where you stand. If there are anomalies in the report, get the issues fixed from your credit lending institute.
Once you have evaluated your position, go to the bank, and state your demand. Make sure you have adequate answers for queries about your finance and how you will payback. Banks have now become vigilant in offering loans, and it’s not as easy as it was before the COVID-19 pandemic.
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Your second option for car financing is asking the dealership for credit. At this stage, the dealer would take a loan on your behalf while you pay off the outstanding amount. When availing this option, you need to watch out for an extra amount that dealerships add to your interest rate as a fee for their financing.
Whether you can dodge this bullet or agree to the dealer’s terms depends on your financial condition. However, the added amount is not sky-high, and you can consider it as a fee for doing all the work for you.
Don’t worry; dealers won’t pick a lender with the highest interest rate. Instead, dealers would put forth multiple options for you to choose from. However, you need to be wary of what’s coming next.
When you opt for dealership financing, they will try to make an upsell by offering an add-on. Steer away from this offer because the markup for these services is sometimes 300%. These add-ons include pain insurance, tire protection insurance, and all the things you don’t need.
Car financing is concerned with how much you can afford. Hence, choosing the right option depends on who provides the most affordable rates.
Haggle your way for the best prices. Dealers usually charge a tremendous amount on used cars to earn their margins, and the salesperson can be hard to work with sometimes. Keep your guard up and go for the kill!