You’ve Got Options
There are four types of lending organizations that can help you finance your car, including:
- Banks may offer competitive loans, but only if your credit is quite good. There may also be restrictions on the cars they finance, depending on the mileage or age of the car. Some banks may only finance cars from dealerships.
- Credit unions typically offer the most competitive rates and may have more flexible guidelines when it comes to purchase details.
- Online lenders that focus on auto loans may also offer competitive rates if you have good credit. However, if you have no or bad credit, they can charge very steep interest rates. Be wary of offers that sound too good to be true.
- Car dealerships have several methods of financing. They may work with banks or other financial institutions to provide auto loans at the dealership. Sometimes large car manufacturers have their own financing arms, also called “captive financing.” Some dealerships extend credit, but typically those interest rates are higher than you will find elsewhere.
Shopping For Your Loan
Once you know the car you want, search online to compare between banks, credit unions, and online lenders. Make sure to compare the same term, or length, of the loan as well as fees and other factors that may affect your monthly payments or total amount owed. Remember that there may also be lending restrictions depending on the vehicle’s age and mileage.
When you’ve figured out the best rate you can secure from a lender, you can compare that to offers from the dealer, if you’re working with one. Sometimes car dealers offer extremely low introductory rates or 0% financing. Be sure to find out if you qualify for these deals before signing anything – and if it is an introductory offer, how much the interest rate will be at the end of the introductory term. Compare the amount you will pay over the life of your loan with the other quotes you’ve gathered.
The one advantage of getting a car loan through a dealership is convenience – you can finance on the spot. That’s why, if you go with a credit union or bank, you may want to consider securing financing ahead of time. Having an approved loan can help you negotiate with the dealer because you know exactly how much you can afford.
Whatever loan you choose, ensure that the monthly payments are within your budget and that the car will likely last as long as the term of the loan. And of course, buckle up, drive safely, and enjoy your new ride.
* Source: Experian, Auto Loan Debt Sets Record Highs.
Please note, membership is required to accept a DCU vehicle loan.
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
