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If you’re preparing to buy a new car, you may look at different ways to finance it. One way you could finance your new vehicle is through direct lending from a bank, credit union, or finance company. This lets you go straight to the lender for your car loan. The other way you can finance your new vehicle is with dealership financing. Dealership financing lets you get your loan through your dealership, which comes with several benefits. In this article, we discuss how dealership financing works and the advantages it can bring you when you’re buying a new car.
How Does Dealership Financing Work?
If you choose to use dealership financing for your new vehicle, you agree with the dealership you purchase your vehicle from to pay the amount of money they finance you and a finance charge. Typically, this means you pay a monthly total to the dealership, which goes toward paying for the loan you received from the dealership. Sometimes, a dealership may keep your contract and handle collecting your payments and servicing your account with them. Most of the time, however, the dealership sells your contract to a bank, finance company, or credit union to do that job for them.
While that may seem similar to a direct loan, there are several benefits to using dealership financing you are unlikely to find from a direct loan. First, dealerships offer both vehicles and financing for those vehicles in one location. This lets you ensure you get both the vehicle and the financing option you want. Second, dealerships may have different hours from other lenders, such as weekends and evenings, because those are their peak business hours. Third, dealerships offer multiple financing options because they work with a variety of banks and other lenders, meaning you can find your own best offer.
The last benefit to dealership financing is that they may have special offers or programs that may help you lower the cost of your monthly payments or shorten the length of your contract. These programs often come with rules such as buying a specific vehicle, having a certain credit score, or being able to pay a larger down payment. With these rules, however, they can offer you much greater flexibility for financing a vehicle than a traditional lender, such as banks or credit unions.
What Do I Need To Know Before I Finance A Vehicle?
There are four things you should consider before you finance a vehicle. First, research Florida and federal laws about financing or leasing a vehicle. Looking at these laws can give you benefits such as being able to negotiate better offers, and knowing what rights you have when you plan to finance a vehicle through a dealership.
Second, determine how much you can afford to pay each month. As you prepare to finance a vehicle, you want to make sure you’ll have enough money to cover all of your living expenses, such as food, rent or mortgage, insurance, and utilities. After you determine how much money you can put toward financing a new vehicle, you can consider the dealership financing options.
Third, it may be important for you to look at the difference between leasing a vehicle and financing a vehicle from a dealership. When you lease a vehicle, you agree to use it for an agreed-upon length of time and number of miles. Once your lease ends, you can either return the vehicle and “walk away” from the dealership, or you can purchase the vehicle for a new, lower price stipulated in the terms of your lease agreement. Finally, a lease agreement’s monthly payments may be lower than financing a vehicle because you’re typically paying the depreciation of the car.
Fourth, it is important to know that looking at the offers a traditional lender has and also looking at the offers a dealership has both require credit checks. Sometimes, having multiple credit checks appear on a credit report can lower your credit score. To prepare for this, ensure you don’t have other recent credit loans on your report except for a vehicle. This can help you avoid any challenges the multiple credit checks may cause. If you know you want to pursue dealership financing instead of traditional financing, it can help your credit more to avoid the traditional lender entirely.
What Do I Need to Apply for Financing?
When you’re prepared to finance a vehicle, you may work with a dealership’s finance and insurance (F&I) department. First, the dealership’s F&I manager may ask you to complete a credit application. This document may require personal information about you, such as your:
- Current and previous addresses and how long you lived at them.
- Current and previous employers and how long you worked for them.
- Date of birth.
- Financial information on your current credit accounts, including any debts you owe.
- Name.
- Occupation.
- Social Security number.
- Sources of income.
- Total gross monthly income.
Once you fill out the application, the dealership’s team receives a credit report, which details your credit history. Your credit history is a report on financial obligations you have and how likely you are to pay them back on time. Even though the dealership gets this report, it can be important for you to have one for yourself as well. This can help you make sure you get the services you deserve. This can also help you track your credit score as they make the checks, which can cause your score to fluctuate.
Are You Interested in Financing a New Vehicle?
At Keith Pierson Toyota, we are here to help you with your financing needs. Whether it’s looking at our offers, finding the best vehicle for your price range, or applying for financing, our team can help you find the services you need. Read our about us page to learn more about our team, goals, and how we can help you find key services. You can also use our contact page to get in touch with one of our representatives and be sure to visit our finance department‘s page as well.
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