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Auto Loans & Financing

Many people pay for their cars through financing. Like leasing, financing is available through automakers, banks, credit unions, and financial companies. The positive thing about auto financing is the freeing of liquidity. When your loan agreement matures, the car is yours.

There are interesting loan deals from automakers that can make financing very attractive. This includes zero percent APR and no-money-down arrangements, which are available to individuals with good credit rating. Lenders have definitely tightened their requirements. Individuals with credit scores less than 600 will probably be offered a shorter loan term at a higher interest rate, if they are approved. Other restrictions also apply when it comes to auto financing. If you want plan on buying a new car before paying off your old one (rollover financing) your options will also be limited, especially if you owe more than your existing vehicle is worth. If you want to upgrade your car often in order to have the latest models, auto financing is probably not the best option for you.

Once you are approved for financing, remember that you will not actually own the car until you are totally done making your payments. If you wish to sell your car you do not hold the title, the process can be complicated, and you will usually need your creditor's involvement.

Auto financing usually requires a solid down payment-not everyone can qualify for a no-money-down deal. Creditors often request 15 percent down. Further, compared to leasing, financing usually costs more per month. Thus, it will have a bigger impact on your monthly budgeting. This requires serious consideration. However, unlike a lease, you get to keep your car at the end of the deal. It is always wise to shop around for the payment plan with the right rate and terms.