How Does Financing Work at a Car Dealership?
(How Long Does it Take to Buy a Car)?
Fortunately for auto buyers, the process of making a purchase can be completed quickly—typically within one to three days, even when you have to get approved for financing.
In some cases, financing approvals can be completed on the same day you decide to buy a vehicle. This process can move faster if you have already been pre-qualified for an auto loan, so if you want to be able to move quickly after you find the perfect vehicle, a pre-approval application can help streamline the purchase process—and also let you know the amount of financing you will be eligible to receive.
(How Do Car Loans Work)?
When you take out an auto loan, a lender provides the money you need to cover the cost of purchasing a vehicle. In some cases, you may choose to place a downpayment on a vehicle, but there are scenarios where you can buy a vehicle for no money down.
Auto lenders may also allow you to fold the cost of taxes and registration into your loan payment, sparing you an up-front cost that can range from hundreds of thousands of dollars beyond the price tag for your new vehicle.
Repayment terms can vary, but most auto loans are offered for a term between 36 and 72 months, or three to six years. Each loan will come with an interest rate that will be charged to the principal of that loan, and the interest payments will be built into the loan similar to any other type of loan.
In most cases, lenders protect themselves on a loan by placing a lien on the vehicle you are buying. This lien entitles them to repossess the vehicle until you have fully paid it off, providing collateral in exchange for a low interest rate.
(What Does Financing a Car Mean)?
Financing a car simply means that you are taking out a loan to pay for part or all of the purchase. For many buyers, this is necessary because the price tag for even a used vehicle can be much larger than the cash they have on-hand to cover the purchase.
Financing also offers a number of benefits to buyers beyond the ability to afford the vehicle you want. It also keeps money in your bank account, improving your cash to cover vehicle repairs or other unexpected expenses. Financing rates for auto loans are also much lower than other types of lending, making them a very cost-effective option.
Even if auto buyers have a limited credit history, poor credit or no credit at all, (auto special financing) may be available to help you afford your vehicle purchase in spite of your credit limitations. As you make timely payments on your auto loan, you can build up your credit history.
(What Does Leasing a Car Mean)?
When you lease a vehicle, you are essentially renting that vehicle for a specific period of time—typically three years, although lease term lengths may vary.
The biggest (difference between a lease and finance) is your ownership status: while buying a vehicle makes you the owner of it, leased vehicles remain owned by the dealership. Over the period of that lease, you will pay a higher monthly amount than the monthly payment on a financed vehicle, but you won’t have the long-term purchase commitment that comes with buying a car.
If you need a car but you don’t know how long you will need it, or if you anticipate wanting to upgrade to a different vehicle in the near future, a lease can be a great option that offers limited financial commitment and flexibility once your lease is over.
(What to Bring When Buying a Car)
When you find the car that’s right for your, one of the first (steps to buying a car) is bringing your financing pre-qualification from a local lender, applying for financing directly through the dealer, or explaining that you intend to purchase the vehicle out-of-pocket.
If you have a vehicle you intend to trade in as part of this purchase, you will also need to bring it to the dealership to have it inspected and assigned a trade-in value. You will also need the title of that vehicle, and may need to provide other supporting documents.