Purchasing a vehicle is one of a handful of high-dollar purchases most people will make in their lifetime. In the past, most people purchased their car from a local dealer or a private owner. However, advances in technology have changed the way many people buy cars today. You can now search online for the perfect vehicle and even find financing. Keep reading to see the 11 auto finance options of 2018.
One: Captive Finance Companies
This type of auto finance company is owned by a major car manufacturer. Nearly one-third of all auto loans are through captive companies and initiated by a dealership. These companies can offer rebates or special interest rates.
Two: Dealer-Arranged Financing
Most dealerships have other financing options besides captive companies. Many car dealers have a multitude of banks or other lenders that they deal with. Often, a dealer will send your information to multiple lenders to find you the best interest rate.
Three: Buy Here, Pay Here Car Lots
These car lots are small in comparison to a dealership, and usually offer only used vehicles. A small percentage of consumers choose this option because it is easy to get approved for a loan. Many buy here, pay here dealers will help anyone purchase a vehicle, as long as they have a steady income.
While many dealerships have a working relationship with banks, you can contact the bank directly. Some consumers choose to get their loan pre-approved with their bank before beginning to shop for a car. This can make the process of purchasing a car go much smoother.
Five: Credit Unions
Credit unions fund nearly a quarter of all vehicle loans. Credit unions are non-profit and therefore can offer lower interest rates than many banks. In order to take advantage of these lower rates, you must be a member of the credit union.
Six: Online Lenders
There are several companies that can assist you in finding a lender online. These companies collect your information, such as name, social security number, and your monthly income amount, and shop different companies for you.
Seven: Consumer Finance Companies
There are many finance companies that offer auto loans and credit cards. You can often be connected to these companies through online lenders. Many of these companies will work with consumers that have a lower credit score.
Eight: Hit Up a Friend or Family Member
For borrowers with poor or no credit, borrowing money from a friend or family member or using them as a cosigner could be the answer. If you have been approved for a loan but would like a lower interest rate, a cosigner could have a positive impact. Often friends and family will charge little in interest.
Nine: Use Your Savings
There is a way to avoid paying interest on a car loan, and that is to save up the money and pay cash. Paying cash will often allow you to negotiate the price of the car. Or save up enough for a large down payment, reducing the amount owed and ultimately the amount of interest paid.
Ten: Use a Credit Card
This method is not often used, but for those with high-limit cards, purchasing a vehicle is one way to earn additional rewards. Large purchases can result in cash back, airline miles, or other rewards. Most dealers will accept credit cards as payment.
Eleven: Home Equity Loans
If you own a home and have some equity, you could choose to use a home equity loan to purchase a vehicle. Usually, the interest rates are low. In addition, interest paid on home loans is tax deductible.
Be sure to research all available finance options before making your purchase. Create a budget to see how high of a car payment you can afford. Once your research is complete you can choose the best finance method for you.