Buying a car is a significant milestone, but it doesn’t have to be intimidating. Our Palatka Beck Chrysler Dodge Jeep team understands the importance of purchasing the vehicle of your dreams for the right price. Here’s what you need to know about financing your new car.
What is Financing?
Financing a car is not much different than other types of financing, such as personal or business. Financing is when you take out a loan that is then repaid over a set period, including interest and any fees. Be sure to seek out the best financing options available that make sense for your needs and circumstances.
If you are going to finance a car, it’s essential to understand what financing a vehicle is and what that means for your financial future to set realistic expectations. There are several vital elements to keep in mind while shopping around for the perfect deal. Here are four leading factors to consider when financing a new car:
- Down payment. The down payment consists of the funds available to put down immediately. The amount will vary depending on creditworthiness.
- Total loan amount. The total loan amount is the full amount borrowed from a lender. It has the greatest impact and includes the price of the car plus any potential add-ons.
- Annual percentage rate. Also known as an APR, the interest rate is another critical factor. It determines how much interest is due for the term. Several factors can impact your APR, such as credit score and desired loan term.
- Loan term. The amount of time that you have to repay the loan in full. The average loan term is 72 months.
How Does Financing Work?
Before you start shopping, first determine what your budget is and how a car payment will fit. Not only will this narrow down the search, but it will serve as a solid foundation for negotiating price and terms.
While most car purchases are financed, it is still more costly than paying for the car outright. Choosing to finance a vehicle is a decision that is entirely dependent on the buyer. Several different financing options include credit unions, banks, in-house with a dealership, and online lenders.
Once you have chosen a preferred lender, it is time to apply for the loan based on the car’s purchase price. You can also apply before selecting a vehicle to receive a pre-approval, which will help you find a vehicle that fits your lifestyle more efficiently.
The price and terms will vary depending on who you choose to finance through. The monthly payment is then determined on the qualified loan amount, annual percentage rate, and loan term.
A loan amount is broken down into two primary parts:
- The principal payment. This applies to the loan balance.
- The interest payment (APR). This applies to the interest balance.
Once the loan is fulfilled, it’s time to celebrate! At this stage, your preferred lender will provide a lien release document to the state transportation agency, and the vehicle’s title will be transferred entirely to you.
When you’re shopping for the best deal, it is good to consider the long-term benefit that makes the most sense for you. A common alternative to traditional auto financing could be leasing a vehicle. However, the catch is that you must return the vehicle at the end of the term, whereas you own the vehicle if you opt for financing.
Refinancing an Auto Loan
Sometimes life will throw some curveballs your way, and that’s okay. If you are interested in reducing your monthly payment, refinancing is an option. Refinancing is when the buyer decides to take out a new loan to cover a current loan balance.
Buyers tend to refinance to save money and potentially lower the annual percentage rate. You can refinance through your preferred lender or another financial institution.
What’s Next?
Financing a new car should not be a confusing experience. Research and compare various financing offers from different lenders. Try not to rush the car-buying process to ensure you make the right decision and are happy with your new car.
Start with a budget in mind and have a clear understanding of where your credit sits. Now that you know what financing is, you’re ready to get out there and find the best possible auto loan.
About Us
Our team of experts at Beck Chrysler Dodge Jeep in Palatka aims to help our friends and neighbors make the car-buying process as smooth and efficient as possible. With a focus on community and quality, we deliver a first-class car-shopping experience.
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