Options and Solutions to Car Financing

If you plan to buy your next new car with cash then the process is simply and straight forward: Pick out the one you like, negotiate the best deal you can and drive it home.

If, however, you are like the majority of new car buyers and need to finance your purchase, you have a couple options.

Buying a Car

First, you could apply for a loan, put some money down and buy the vehicle you like. This is the route most buyers take. The traditional method has you putting more money down on the price to lower your monthly payments. Lenders like it when you put money down on your new vehicle because it shows them you have a vested interest in paying off the loan so you protect your investment.

You should still negotiate the best deal on the purchase price. Also, don’t be afraid to shop around for the best financing deal available. The dealership you buy your new car from will have some options available for you but they are rarely the best deals out there. Look online for some comparison rates and use the payment calculators to help you figure how much of a new car you can afford. You should also visit the bank where you deposit your paycheck and the local credit union. They both have financing options which will likely differ from what you are offered at the dealership.

Leasing a Car

If you are not sure you want to buy your vehicle outright and want to pay less down and have lower monthly payments perhaps a lease is a better deal for you.

Leasing a vehicle means you never fully own the vehicle, you merely pay for the right to drive it around. The dealership will continue to own the vehicle and will therefore perform all schedule servicing and maintenance of the vehicle for free while you drive it.

There are two major draw backs to leasing a vehicle rather than buying it, however. First, the obvious, the vehicle is never really yours. At the end of the leasing agreement the car reverts to the dealership. You can look to lease a new vehicle if you like, but all the money you paid for the previous few years is gone in the form of leasing payments.

There are also severe limitations to the number of miles you can drive your leased vehicle every year. Usually leases are limited to between 12,000 and 15,000 miles each year. If you exceed this limit you pay extra for every additional mile you drive. This can add up to a lot of money if you go over the permitted by a few hundred miles.

With a traditional purchase you end up owning a car that you can continue to drive until it falls apart underneath you. Or, you can resell the vehicle and use that money to buy another new car.

With a lease you drive a like-new car every day for a few years, pay less for the privilege, but end up with no car when the deal is done.

Two big options, but in the end, the choice is up to you.

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