When you want to finance a car, you want to also know the ins and outs of getting involved in a negotiation with a seasoned car salesman. But maybe you already have agreed to a specific price of a car. Now, do you think it is time to feel at peace at it? The answer is not exactly.

Just remember that when you car finance in the form of the dealership, it is the finance person who will work on commission. They won’t tell you about that financing deal that benefits them only. Some things pile up on the end stages of the deal like alarm systems, warranties, undercoating, and many more. It is the dealership that earns the most from the said deal.

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Financing a car is about signing on a contract or lease agreement. It also often comes in monthly payments to the dealership but with an exchange of driving off the lot in a new-to-you car. But those salesmen won’t ever tell you that although financing a car may satisfy your transportation need now, it is still considered as the most expensive option.

You will still be paying toward the taxes and fees as the principal of the vehicle. You will also pay the yearly percentage rate every month. They might as well as squeeze every dime you have as much as they can.

Different Methods of Financing a Car

There are two ways that you could finance your car: direct financing and leasing. Both of them are popular choices but also are equally notorious for taking a portion of your paycheck every month.

Direct Financing

If you want a new car that is great for an off-road trip, the salesman can give you a good deal but a steal deal as soon as you drive it off the lot. In the dealership, it is about offering car financing options for the first 3 months. It, later on, gets more difficult to go back in your old lifestyle since it means a deal of a lifetime.

Just remember that “zero down” equates to an even bigger loan. And “zero interest” does not mean having no interest at all. It is about a delayed interest. Let us say that you fell in love with the sales pitch and went in for a car of your dreams. The cost of the vehicle is 35,000 dollars. You never had your down payment on it yet. Its interest rate is at the standard rate of 6.13%. The new car payment will be somewhere falling at $700 every month. And that is naturally disturbing on your pocket.


Leasing is believed as the most expensive form of driving a car. It is something that will never be openly shared to you by a neighborhood car dealer. That is why we are here for you. The leasing of a car may seem a good idea. But in reality, it is you required paying to drive a luxurious rental car. While the monthly payments on the lease can be lower than when you directly finance the car, the hard-earned cash is just padding the pockets of the dealer. This will continue until the endmost period of the lease term.

The lease payment typically includes the loss value of the car or the expected depreciation, fees, taxes, and rental charges. But when you will purchase the vehicle at the end period of the lease, you will give it back to the dealer.

Do not also forget the fact that a mileage cap is there on the lease agreements. If your job will require you of driving across the country on a week, you may think twice before finally signing on the dotted line. Also, follow the recommendations of the manufacturer for the upkeep. This will maintain it in its pristine condition. Or else, you will be going to pay for it later. Know more about the ways to determine the best rate for financing your car. Look at the pros and cons of each of the financing resources mentioned.

Other Significant Tips to Financing a Car

When you are ready to buy a used car, you will find that any of those two mentioned methods can be difficult when financing a used car. If you still are in trouble, below are some of the significant tips to financing a car.

1. Know More about Your Credit Score

Before you go to the dealership, you need to know if you have a bad credit. You will have a high-interest rate when you have no or little to no credit. For those used car dealership having low-interest rates, they mean to say that your FICO credit score should be 700 or over. Those who have a lower credit score will be charged even more.

2. Obtain Financing Quotes

Get quotes from those people who want to give you a loan. Look for a borrowing company for any of your big purchase in life. Compare the amount they want you to loan and the length of the term. Know more about the interest rate they offer for you to get the best deal before signing contracts.

3. Stick with Short Term.

You may be required to pay more every month following a shorter loan term. That will end you up saving more money in the long run. Pay off the loan a lot faster with you paying less interest over time. You may be forced to stretch payments for 5 years or more. When you do so, it will just even cost you much. The interest will also even more increase. You might as well end up with a vehicle that does not equate the price when it comes a time you pay it off.

4. Put 20% as a Down Payment

When you buy a used vehicle, you should put 20% as part of the down payment. As you put more of your money down, this is taken off the initial loan. This might decrease the payments and may affect the interest rate. As you save and put 20% down or more, you will save a lot of money in the long run.

5. Pay in Cash for Other Fees

There are still other fees incurred like the documentation fees to dealership fees. There will also always be sales tax to watch out for when you buy a vehicle. All of those taxes and fees will be paid for in cash than just into your loan. These fees will be added to the loan by the dealerships. You will still be required to pay for more interest on the amount added for the sales tax.

6. Work According to your Timing

Car loan interest rates will fluctuate because of economic conditions. As you go searching for a loan, research the interest rates that go the lowest for the company you want to borrow from. Obtain quotes from any time of the year. If the dealerships are not selling so many cars, they will give you an even better deal on the interest rates.

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7. Get a Co-Signer

If you are just beginning with little to no credit, you may be facing a bind. Although you have a well-paying and secure job, the interest can be quite high when searching for financing offers. You may get a co-signer with a good credit history. This will impact the interest rate of the loan and will also lower the monthly cost.

8. Avoid the Things You Do Not Know

If you are still not sure of a company, avoid it as much as possible. The contracts can be so hard to read. You may also end up agreeing to the outrageous expectations. Avoid such sticky situations and borrow only from the trusted companies.

9. Avoid Late Payments

There are times that you can go late when it comes to the payment of a used car. This is also due to forgetfulness or inability to afford at the due date. It can happen to you, to any one of us. But, never make this a habit. As you go make a late payment, you may just end up paying huge penalties and fees. Make your payments on time as this will improve your credit and will save you money in the end.

Now, you have learned more about the ways of financing a car!