As you purchase a car, you will typically choose your vehicle and obtain a loan from a third party, usually a financial institution, to complete the purchase. However, there are dealers who offer to finance for those who are not able to get their funding in the usual way. It is clear that buying and financing a vehicle in one go may seem very convenient, but it is not always the best choice if you want to save money on your purchase.
The best choice for you, of course, depends on your financial situation. Here are the strengths and weaknesses of the financing in the branch, to prepare the purchase of your next vehicle.
Advantages
Convenience
You go to the dealership, sit down with the seller, choose your car and get financing in one visit and one place. Nothing more convenient! Especially if you are someone very busy, or if you have several obligations that limit the time you have to spend on such a transaction. We do not often spend as much money as we spend on buying a car, so it’s clear that the convenience of on-the-spot financing makes the transaction more comfortable.
Bad credit? This is not a problem for dealers
The dealer’s priority is to sell you a vehicle, so they want as little as possible to deny a potential customer the opportunity for financing. They will make a special effort to ensure that you can get financing for the vehicle you want, so if your credit report does not get you the financing you are looking for from a traditional financial institution, the dealer could be the only way for you to get the financing needed to make the vehicle affordable. In this case, however, the dealer will profit twice because they will have the sale and they will use your credit report to justify a salted interest rate.
You could afford the vehicle of your choice
If you have a difficult financial situation, a dealer could still find you a financing option that allows you to buy the car that really interests you. Be careful, though: do not choose a vehicle that you would be unable to pay in the long run.
The disadvantages
The loan will cost you more
If you decide to choose on-site financing at your dealership you will probably have to pay more for your car than if you had obtained financing from an external lender. The dealer will certainly require a very large down payment and you will have to make monthly payments for several years at an annual interest rate higher than what you could have obtained with an external lender. When you finally finish paying your loan, you will have spent almost twice the retail price of your car. By getting your financing from a lender, you can buy your vehicle in one go and then get along with your lender as to the payment route.
Salted interest rates
In most cases the rate imposed by the dealer and higher than the rate offered by financial institutions or other lenders. This is the most difficult disadvantage for buyers who get their dealership financing because the terms and conditions of these loans often do not allow for refinancing and these customers end up with an unreasonable interest rate that can not be changed. If you are thinking of signing a purchase agreement with on-site financing, make sure to ask for the interest rate and take the time to compare it with the average market rates before closing your purchase.
Closed loans
Dealership auto loans can very often be closed loans. This means that even if you have the funds to make a few more payments on your loan, or even pay for it in full, dealers will not let you do it. Even if you wanted to pay in full before the natural term of your loan, you would be obliged to pay all interest that would be due for the full term of the loan. That’s why on-site financing can be a big mistake for some.
The dealer may not be reporting your payments to credit bureaus (TransUnion and Equifax)
For some, this is a serious problem: if the dealer’s on-site financing is the only way for an individual to make the purchase of a car because his credit does not allow a loan from another financial institution, he expects his regular payments to his car loan to be a way to improve his credit rating to avoid such refusals in the future. If the dealer does not report these payments to the credit bureaus, however, the financial situation of that individual will not be improved by the significant obligation he has just started. Yes, he has a new vehicle, but his credit rating will remain unchanged.
Financing may seem very convenient, but since it is just as easy to obtain pre-approval for a loan. On-site financing is simply another tool that the dealer uses to extract additional profit from its customers. visit PushButtonfor.org Homepage will find a financing solution that is perfectly tuned to your needs.