Financing a Car

For an average person, buying a car from one’s own resources is not very feasible. With the kind of prices that new cars and used cars command, financing becomes a viable option. You will find many finance companies offering auto loans including the dealer from whom you intend buying your car. Finance may come easy, but there are complications involved in the process. You may later find yourself in a fix over a contract that you cannot afford.

Advantages of Dealer Financing

The main advantage of dealership financing is that of convenience. Financing is quick, as it is as easy as walking in the car showroom and driving out in a brand new car.

As compared to other forms of finance, dealership finance is fast. There are lesser hassles involved.

Dealership financing comes at competitive interest rates, if you qualify certain conditions.

Disadvantages

Certain information is kept under wraps by the financier and not disclosed to the borrower. Financial information is available on certain slow selling models that normally have a low resale value. These are also limited to dealer stock. In this case, you may have limited options to color and style.

Your finance agreement may involve hidden fees. The financing options may have larger prepayment penalties resulting in higher down payment. You may also have to bear higher late fee penalties for payments made beyond the due date. You may also have to pay a higher interest rate in case of late payment.

Most dealership loans are compounded interest loans, so work out the actual interest rate.

0% interest rate offers are offered to eligible borrowers, which is a small group of persons. According to a study, very few people actually get the 0% rate on 0% offers. This depends upon the credit rating and many do not qualify.