Before you find your new or used car, you should know how you will pay for it. Most people don’t have cash to just buy your car. In general, there are three main options:  financing through the dealer, financing through your own credit union or bank, or leasing.

Use the dealer’s financing

 This is usually the easiest option. Most large dealers have in-house finance reps that can provide you with options to finance the car. They may have relationships with a few select banks. If you have good credit, you’ll be in a much better position to get a loan at good terms. If you don’t have great credit, you may end up with a costly loan if you let the dealer do the shopping for you.

Don’t focus just on the monthly payment!

Extending the terms of your loan will result in a lower monthly payment, but will cost you more over the life of the loan.

Calculate your loan payment

Consider leasing instead of buying

Should you lease or buy? Leasing often provides the lowest monthly payment. But be careful of exceeding the miles allowed in your lease. When you return the car, you may have to pay for the extra miles and any wear and tear. This cost could come out of the deposit you put down at the start of the lease.

Find your own financing

This is often the best route to go because you can go through a lender of your choosing. You can fill out a credit application with your own lender (banks, credit unions) and see how much they are willing to lend you for the vehicle that you have in mind. Once you have a figure, you can tell the car dealer what your limit is and use that to help you negotiate.

Good credit is key! 

In order to qualify for a car loan or lease at the best possible interest rate, you need to have an excellent credit score. The lower the score, the higher your interest rate will be which results in a higher monthly payment and a higher total (principle + interest) cost of the vehicle.

 

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