Are you trying to navigate through the confusing process of buying a car? You may be wondering about the particulars of how a car loan works. It helps to understand the mechanics (pun intended!) of auto loans before applying because you can increase your odds for approval.
Car loan quotes from banks
Financing a car through a bank generally requires you to obtain pre-approval for a loan where the bank provides you with a quote and letter of commitment that you take to the dealership. Banks and other financial institutions are great places to get approved for an auto loan if you have good credit. However, banks can be frustrating to work with as they typically only cater to customers with higher credit scores. The process involves multiple in-person appointments and lots of paperwork.
Car loans from car dealerships
When you are vehicle shopping at dealerships, they will often give you finance options at the point of sale. These options will be on the specific vehicle you have selected. Dealerships are more convenient because you can get the car and the financing in one place. Financing through a dealership may prove to be a better option for you if you are in a time crunch or have a less than desirable credit score. You can walk in, check out the cars, take a test drive, sign a contract and get the key to your car that same day. Just make sure you have taken a look at the options and found what is best for your finances.
Car loans from online service providers
Online providers are starting to emerge with more flexibility to help customers facing all types of credit situations to connect them with lenders and dealerships that know how to help. Applications can be completed online from the comfort of your home. There are no in-person appointments until you find a car in your area that you love.
Market value pricing
A vehicle’s market value is typically defined as the price a willing buyer is prepared to pay a willing seller for a vehicle. Market forces dictate the price of a vehicle, which means it can differ from region to region and in terms of the type, mileage, condition, scarcity, and manufacture of the vehicle. Factors such as the condition and history of the car, the colour, and mileage, demand, the state of the economy, or inflation rates can all impact the car’s actual value. Saving for a down payment or trading in a vehicle can reduce the amount you need to finance and reduce your financing costs.
There are two general types of interest rates a bank or a dealership can offer you—“fixed” and “variable.” With fixed interest rates, the amount of money you pay every month remains the same regardless of how much time it takes you to pay off the entire loan. Whereas with variable interest rates, the amount of money you pay monthly depends on the market, so when the market interest rates shift, so too does your own. The interest rates that a lender charges will depend on the lender’s set-prime rate, the borrower’s credit score, and the vehicle attached to the loan. Longer-term loans can make your monthly payment lower. However, the longer you take to pay back a loan, the more interest you will pay. A shorter loan also means lower rates but higher premiums, so make sure you can afford it.
A lot of what goes into your auto loan will depend on economic factors out of your control, so it is best to focus on what you can control to get the best rate. Here at CRS Automotive Hamilton, we take care of our customers’ needs and preferences. Come to our Cambridge, ON used car dealership and see for yourself the vehicles in our sale line and the financing options we have to offer. For more information on pricing, rates, and car loan considerations, contact us today.