Borrowing Money to Buy a Used Car

We get a lot of questions about financing and how it works so we’re taking a deeper dive into the vehicle financing process– so you know exactly what yo expect when you buy your new car. 

To kick off this series, let’s review the most common financing options:

Dealership Loan

Many dealerships like ours offer several affordable financing options if you can’t pay the lump sum at the time of purchase. Most offer both short-term, partial loans if you’re able to put money down on the vehicle and longer-term loans for bigger purchases.

It’s important to read the loan agreement in it’s entirety so you know exactly what you’re getting yourself into. Make note of the down payment, and the interest rates and their variability. Bigger dealerships tend to have stricter, more rigid terms when it comes to financing packages, while smaller and family-owned businesses like ours have more flexibility with each customer.

Bank Loan

Most banks, credit unions, and other financial institutions offer reasonable auto loans for members and account holders, as long as you’re in good standing. Typically, a customer can choose between a used-car loan or a more general auto loan, usually reserved for new vehicles.

When getting a loan from an institution, it’s important to be mindful of the terms of the loan, such as the starting interest rate, if the interest rate is variable or static, whether or not collateral is required, how default or late payment can affect your co-signers, and other terms as these tend to be less flexible than dealership terms.

That said, the better your credit is and the longer your credit history is with that institution, the more bargaining power you’ll have to push for better loan terms.

Savings Plan

If you know you’ll need a new car in the distant future and don’t want to have a car payment hanging over your head every month, or don’t have the credit score for a loan, make a savings plan. Do some research and determine a reasonable budget for all of the specs, features, and other requirements you’ll need, then figure in fees and taxes. Once you have a number for the price tag, break it down– divide the dollar amount by the number of paychecks until your planned purchase date, and you’ll know how much you need to save every (or every other) week if you want to pay for your car in cold hard cash. This method requires a considerable amount of self-control and discipline, but you can always adjust your plans as time goes on.

Many people who use this method find it helpful to create a separate bank account for their “car fund.” Some even to set up a direct deposit into this account so they don’t have to think about it when they get every paycheck.

At V&F

Whatever payment plan you choose, V&F is here to help! V&F Auto Sales has been serving the Western Mass community since 1988. We strive to provide our customers with top quality, affordable vehicle inventory and convenient financing options so you can get the car you love– without breaking the bank. View a complete list of our inventory on our website, or visit us at 7 Harding St, Agawam, MA 01001.

 

Written by Nicole Palange

Leave a Reply

Your email address will not be published. Required fields are marked *