Car Financing & Down Payment Confusion??
My boyfriend and I are looking in to buying our first car. Neither of us have any car buying experience so things like car financing, APR, and all the similar lingo are so vague and confusing. What does it mean to get financing directly from the dealership? Pros and cons of leasing (but what does leasing mean?) ? Is it just better to get a car loan from a bank or another financial source and then just completely pay off the dealer (is that how it works?) ? We were also playing around with idea of getting a smaller outside loan to cover the down payment and then go through the dealership for the rest? Comments, suggestions, links to good web resources??? Help!?!
- 1 decade agoBest Answer
Let's get some of the stuff you are confused about out of the way first. Car financing means that when you go to a dealership to buy your car and they are arranging financing, you will be paying back a lender that they use not paying them back. In most cases, they have several lenders with different programs to assist buyers in all kinds of different circumstances. If you are a first time buyer, they generally have programs that will help you get your first car without a co-signer, but they may still ask for one if you do not qualify. Pros and cons of a lease. A lease is designed for one specific thing...to help people trade every 2-3 yrs without fear of owing more than the car is worth when they trade. Here is the down side: going over the miles is the most common. Most leases are 15000 per yr with a .15 charge for each mile over that (24 mo lease 15k per yr=30k; you have 35k at turn in; that is 5000x.15=$750 in excess mileage fees. Another thing to consider is wear and tear charges, but as long as your windshield is in good shape, tires are not bald, major stains or tears and no major dents that will require over 3 1/2 hrs to fix per body panel, you will be in good shape. Leases are not a bad thing, they are just not for everyone. As far as getting a loan for the down payment, that is not such a good idea because now you have two loans to pay back. You can generally take about $20 per thousand to estimate a payment for a car, so if you were thinking of putting down $2000 that would mean about $40 difference on your car payment vs. the payment of paying that money back to a different source.
I hope this helps and good luck!Source(s): Director of Finance
- 1 decade ago
Okay I`ll make this simple. In some states it is illegal to take out a loan for a down payment and it is also a bad idea. You should look for the special finance deals at dealerships i.e. 0% for x amount of months. The dealer will sell you the car for invoice unless it is some special hot product. I am not aware of any product out there that is that way currently. Remember to have a budget and stay as close to that as possible. Tell the dealer the truth and he will try to make money on you thats okay it is how he gets paid but be realistic and you will make a deal. When you figure out the car you want you can go to kbb.com and price it out the way you want it. Dont forget it is okay to let the dealer make some money you want them there when you need service. The other thing is if you need help with anything after the purchase they always remember who they made money on and who was a pain. Good luck!!
- 1 decade ago
Here's what I have learned from my experience...
Don't go into a dealership with a fixed price in mind- keep in mind what you can afford in a car payment (you'll be able to afford more than you think).
Go to a reputable dealer- they usually have arrangements with local banks and credit unions and will be able to get you a better financial deal than if you go to a bank on your own. I wouldn't get one loan to cover a down payment and another for the rest of the car... that's just setting yourself up for trouble if you can't make good on one payment or the other. Also, consider getting a co-signer. A co-signer's good credit can help you get a lower APR (annual percentage rate) which will get you a lower monthly payment.
Put down the biggest down payment that you can- this will allow you to finance a smaller portion of the actual purchase price. Or, you can afford more car with a larger down payment.
Leasing- unless you want to get a new car every 3 years and/or you don't drive more than 12,000 miles per year, stay away from it. At the end of the lease, you have the option to purchase the car, or get a new one. And, if you go over the milage limits, there are steep penalties (I've seen as high as $.10/mile).
Finally, don't be afraid to walk away from the dealer if you don't like what you see/hear. Young and/or inexperience buyers can make a salesman's day since they don't have the car-buying savvy that our parents have.
Also, check out this article on Yahoo! Finance about car financing. http://finance.yahoo.com/how-to-guide/personal-fin...
Hope this helps!!
- Resident HereticLv 71 decade ago
Go to your preferred bank and ask to speak to their auto loan officer. They can give you the straight talk about APR and all that financial lingo that car salesmen like to gloss over. You can get approved right there at the bank, so you know what you have to offer at the car dealership.
I've never leased a car, but I do know that if you LEASE a car, you have to come up with a lot more right, money-wise, at the start than you do if you purchase. When you lease a car, at the end of the lease period, you don't have a car after all those payments unless you can come up with another wad of cash.
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- Anonymous1 decade ago
I am a salesperson and would be willing to help you and provide you with honest info to help you with your purchase 931 206 3212 my name is BrettSource(s): sales