Understanding Vehicle Financing


A brand new car can cost around $40,000, and a pre-owned vehicle from a dealership at approximately $15,000.  With the huge amount required to acquire a vehicle, some people tend to use the direct lending option to get a loan straight from the financing companies.  Others go for dealership financing, where they can get financial aid through the dealership. Here's a closer look on your options on vehicle financing.


What is Direct Lending


Auto loan

Direct lending allows you to receive loans directly from monetary institutions such as credit unions, banks, and finance companies.  You will go into an agreement stating that you consent to pay the amount financed together with the amount charged in a definite period. Direct Lending may provide you with benefits such as finding a better car price or getting the credit before you even purchase a car.  With direct lending, you will have the opportunity to go into several shops and ask different lenders about the terms and conditions before you decide to purchase the vehicle.  Credit in advance allows you to have the credit even before you buy the car.  Through this system, you will know your budget for your vehicle.


Dealership Financing

 Car Financing

One more familiar form of vehicle financing is called dealership financing.  Under this type, the vehicle financing will have to come through the dealership.    You and the dealer will have to go into a contract stating that you agree to pay for the vehicle you will acquire in a period stated on the agreement.  The dealer chooses to retain the contract, but they usually sell it to credit unions, banks, and finance companies.


With dealership financing, it is more convenient since the dealer will offer the vehicle financing and the vehicle in just one location.  Some dealers also have an extended work time and may even be available during weekends.  There is also a more flexible option for financing due to the dealers' relationship with the different monetary institutions.  There are also special programs that you can acquire with dealership financing.  But in most cases, you need a larger down payment or a good credit standing if you want to be eligible for the special program.


Additional Pointers on Financing

 Vehicle Financing

Before leasing or buying a new vehicle, you must review both state and federal laws that may affect the process of vehicle financing.  The law will allow you to find better leverage on the vehicle that you want to purchase.  You should also analyze your budget when buying a car.  The budget should also include the monthly expenses of your new vehicle.


Most dealerships have a department solely responsible for addressing your concerns on Vehicle Financing.  They will be able to tell you about the available option in their financing.  They may ask you to register for a credit request which may include the most basic information.  Be sure to understand the terms and agreements stated on the contracts before you sign them.

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