Your Guide to Understanding Car Finance Basics
Next to buying a home, a vehicle is generally the second largest investment that most people make. Because this type of purchase requires a sizeable amount of money, the majority of car buyers don’t have the means to pay outright in cash or don’t wish to spend that much all at one time. If you fall into this category as well, it’s important that you begin to do your research into understanding car finance. Financing a vehicle means you will be entering into a loan agreement that will give you a monthly car payment for a fixed length of time.
When you finance through a dealership, they will make all the arrangements for you with a bank, credit union, or finance company to serve as the assignee on your account. This is the company to whom you will make your monthly payments. Customers often choose to finance with the dealer, because it provides a one-stop-shop of financing options as opposed to them having to go out and shop around for rates on their own.
Factors Used to Determine Your Rate
A large part of understanding car finance is knowing what factors potential lenders look at to determine your eligibility and rate. The main considerations include credit score, debt to income ratio, size of the loan that’s needed, amount of the down payment, age of the vehicle, and length of the loan.
Calculate Your Monthly Payments
After examining all this information, financial institutions will decide whether or not you’re approved, and if you are, calculate your monthly payment. This number is based on the total amount being borrowed, how long you decide you want to stretch out the loan, and the annual percentage interest rate that is offered.
What to Do Before You Go Car Shopping
Now that you are on the right path to understanding car finance, it will be easy for you to recognize why it’s important that you check your credit and establish a budget prior to going car shopping. Since your vehicle payments are likely to take up a large portion of your income each month, you need a good idea of what you can afford long before you agree to a loan. Once you have a number to work with, you’ll be able to see exactly what your vehicle choices are. It’s also vital to know your credit score ahead of time so you don’t receive a surprise at the dealership. Reviewing your credit report will give you time to clear up any discrepancies that might be lowering your score.
Financing With Peters Auto Mall
When you shop at Peters Auto Mall for your next vehicle, you will have the convenience of being able to finance your purchase right at the dealership. We have experience working with all types of credit backgrounds and incomes to find our customers the best solutions possible. Our approval process is quick and simple so you can know what your next steps will be right away. You can also trust that we only work with reputable finance partners to get you the most affordable rates. Don’t hesitate to ask our knowledgeable staff anything that will help you in better understanding car finance.