Press Release Summary: Learning how new car loan financing works is beneficial in choosing a loan that works out well an individual\'s personal financial profile, rather than damage it by overburdening them with unnecessary fees, high interest rates or atrociously high monthly car payments.
Press Release Body: Learning how new car loan financing works is beneficial in choosing a loan that works out well an individual\'s personal financial profile, rather than damage it by overburdening them with unnecessary fees, high interest rates or atrociously high monthly car payments. Understanding how car dealers make money will also increase the car buyer\'s awareness of the industry and ability to find the best loan suitable for his financial needs. Properly researching new auto financing is even more important than studying used car loans, because a new care loses the initial value quickly, and the wrong loan could make this an even more devastating loss.
Car salesmen make money two ways. The first way is the actual profit from the sell of the automotive loans. The dealer sells the car for more money than he bought it for. The difference between the two prices is the profit he makes from the sell. The second way that an automobile dealer makes money is through financing the loans for the cars. The profit from financing is generated through higher than standard interest rates. These loans are offered by the dealership itself. The credit department in a car dealership is usually more lenient in whom it finances than banks and credit unions are. Therefore, the person with a less than perfect financial background may benefit from dealer loans. However, typically dealer loans do not offer as competitive of interest rates as bank loans do. For this reason, a person with fairly good credit would benefit from seeking a loan through a standard lending institution. During new auto financing, the purchaser will also be offered some additional options for their car.
The credit department of the dealership usually offers its employees commission incentives to sell options like: extended warranties, an alarm system for the vehicle and undercoating for the chassis of the car. A savvy car buyer will avoid these pitfalls of the new auto finance procedure. After agreeing on an acceptable price for the car with the sales person, a prospective vehicle purchaser needs to be aware of the additional costs that the sales person will likely suggest. If an extended warranty or an alarm system is truly what the car buyer wants, then he or she needs to factor that into the amount they agree upon for the car. There are many reasons why it is often more prudent to choose new auto financing through a third party vendor, rather than the car dealership. One of the reasons has already been discussed.
Because banks and standard lenders don\'t have as much to profit from a specific loan, they tend to offer more competitive interest rates. It is also a good idea for an individual to expand his or her financial portfolio. Not only can the car owner now list that she has successfully qualified for a new car, but the bank or lending institution is now a second reference for her reliability in making payments. In addition to these advantages in choosing standard lenders for used car loan financing and new auto financing, the banks and credit unions have no vested interest in the additional offerings of the car dealership. Bank employees do not work on commission, like the sales personnel at the dealership. A loan officer at a bank will not press a customer to buy an extended warranty or an alarm system. The average employee in the credit department at the local car dealership, however, works on commission and thus will try to \"up sell\" the client on other merchandise or services.
Outside of dealerships and banks, a person purchasing a car still has other options for paying for the vehicle. Searching online car loan and throughout the community for no credit check finance institutions is a viable option for someone with tarnished credit. If the credit is quite damaged, the purchaser may want to consider buying a used vehicle to build credit before moving on to a new car. If there are just a few late payments and similar small blemishes, seeking a non-standard lender will still probably make buying a new car a possibility for the prospective buyer.
If the person buying the vehicle is a home owner, an equity loan is still an option. The benefit to new auto financing through a line of equity is that the interest rates tend to be significantly lower than standard car loan rates. There are usually negative aspects to all things. Drawing a loan from the equity in a home forever links that car with the home. Should the car owner lose her job and not be able to pay all of the bills, she may not want to lose both her car and her home for a few missed payments. Extreme caution should always be taken when borrowing money against home equity. Seeking help through friends and relatives is also another way to find enough money to buy a new car. Relatives seldom charge interest, so this is obviously the cheapest type of new auto financing.
2022
