If you're shopping for a new car but can't afford it upfront, car financing can still allow you to be the proud owner of a brand-new vehicle. Below, you can learn how car financing works and discover how the team at Jim Tubman Chevrolet can help you purchase your dream car, truck, or SUV.
How Does Car Financing Work?
Car financing is when an institution lends you money to purchase a vehicle. Some financial institutions like credit unions and banks offer this service, but it's often more convenient to seek these services from the car dealership where you're completing your vehicle shopping. Our team at Jim Tubman Chevrolet is one of these dealerships that offer car financing, and we welcome all interested customers to learn more about this service.
When you find a vehicle that you love, we'll help you secure the financing you need. You can apply for an auto loan through us, and our team of finance experts will determine whether you qualify for one. Upon approval, you can make a down payment to decrease the amount you'll pay every month. Once the terms of the auto loan begin, you'll make monthly payments up until you pay off the entire loan amount.
What Are the Parts of an Auto Loan Payment?
You can think of an auto loan payment as split into two separate parts. The first part is the principal payment, which is for paying back the initial loan amount. Your monthly payment will be a bit higher than the principal payment divided across your payment period, as there's a second part of your monthly payment. This second part goes toward paying the lender interest on the loan.
What Determines Your Auto Loan Payment?
It's likely that two customers who are purchasing the same vehicle may have different auto loan payments. This is because an auto loan payment varies depending on several factors. The first factor to consider is the loan amount, which you can calculate by subtracting any trade-in value or down payment that you make from your desired vehicle's purchase price. Another factor that can affect your auto loan payment is the desired loan period. A longer loan period may decrease the dollar amount of each monthly payment, but you may pay more in interest over time.
Still, another factor to consider is the annual percentage rate that you pay on the loan. Different factors can influence the APR, like your loan term and credit score. You may also consider whether you're buying a new or used car, as interest rates are typically higher for used cars.
Are There Alternatives to Car Financing?
When you're thinking about financing a new or used vehicle, you may also consider alternative options. For example, if you have cash available, you may consider purchasing your desired vehicle outright. This way, you don't have to make monthly payments or worry about paying excess money in interest. Another alternative to car financing is leasing a vehicle.
Some customers prefer leasing over buying, as leasing allows them to drive a new vehicle every three years or so without committing to a single purchase. When you lease a vehicle, you make smaller monthly payments than if you were to purchase the car. While you don't gain any equity in the car, you pay for the luxury of using the car and letting the dealership handle any repairs that arise. Here at Jim Tubman Chevrolet, we can discuss the benefits of leasing versus auto financing so that you can decide on the route that's best for you.
How To Get the Best Auto Financing Terms
Here are some ways that you can secure the best auto financing rates:
Learn What Your Credit Score Is and Improve It
When you begin to consider auto financing, you can first learn what your credit score is. You can check your credit score through one of the two major credit bureaus, TransUnion and Equifax. Checking your credit score won't harm your credit, as this action doesn't count as an inquiry. When you have a higher credit score, you may qualify for an auto loan with a lower interest rate. The reverse also applies, so you may need to take some steps to increase your credit score.
You may improve your credit score, but it can take some time. Begin by paying off the existing debt that you have. You can also be sure that you pay all your credit card payments in a timely manner. Still, you can avoid all other major credit applications until you're ready to apply for an auto loan.
Do Your Research
You can also secure the best auto financing rate by doing your research before you commit to any terms. One of the easiest ways to do your research is to use an online payment calculator. This tool lets you plug in different numbers so that you can understand what your payment terms may be. It can also be helpful when comparing different vehicle options, down payment amounts, or other factors that can influence your final purchase decision.
Understand the Total Loan Amount
As you're conducting your research, it's important to understand the total loan amount rather than the monthly payments. When you only look at the monthly payments, the loan may seem more appealing than it actually is. A loan that extends for a long repayment period may come with unreasonable interest, meaning that you need to borrow more money than you originally intended.
Visit Jim Tubman Chevrolet for Auto Financing Today
If you're ready to discuss financing options, contact our team at Jim Tubman Chevrolet today or fill out an online finance application. One of our friendly sales consultants will review different financing options with you so that you can finance your new vehicle with peace of mind. If you'd prefer for your first contact to be in person so that you can ask questions about financing and browse our inventory, feel free to visit our location on Bank Street in Ottawa.