If you are planning to purchase a new car, you may wish to borrow money so you can finance the deal. By doing this, you will get to enjoy your new vehicle while making incremental payments to cover the cost of purchasing it. When looking for car financing, you typically have the choice of using a direct lender or of using financing offered by the car dealership. It is essential that you understand the difference between these forms of loans so you can make the choice which is right for you and your current financial situation. Below is a guide to everything you need to know.
Borrowing from a direct lender
There are many banks which offer car loans which can be used to finance the purchase of a new vehicle. This means you can shop around for the best interest rate. Another benefit of borrowing directly from a lender is that you can secure financing before you begin to shop for a vehicle. Doing so will mean that you will know your budget when you enter the car showroom.
Using finance offered by a vehicle dealership
As the name suggests, vehicle dealership finance products are provided by the car dealership themselves. When you sign the agreement, you enter into a contract with the car dealership rather than with a direct lender such as a bank. This contract will detail how much you will pay back and over what timescale the payments will be completed. In the majority of cases, while the legal contract is between you and dealership, the car dealer may sell the contract so a finance company or bank service it, and it is this institution which will collect payments from you.
The main benefit of taking out car financing from an auto dealership is the convenience of doing so. If you have called into a dealership to look at a new car and you are offered a loan, you can complete the process there and then, and you may even be able to drive away in a brand new car. Auto dealerships are also often more willing to provide credit to people who would not be able to access credit from a direct lender due to a poor credit score.
If you would like to find out more about the different types of finance which can be used to purchase a new car, you should contact a car dealership today.
When I bought my first car, I thought I had got a great deal. However, it was only many years later that I realised how naive I had been. I wasn't ripped off, but I didn't know exactly how to negotiate to reduce the price or to get added extras thrown in as part of the bargain. I learnt about how to get a great auto deal from my brother-in-law, Brian who works in the trade. Over the years, he hasn't given me loads of useful advice about what to look out for when looking for a new auto to drive.