Top Tips for Auto Finance in 2023

Posted Monday, Oct 16, 2023

You have probably considered auto financing if you want to purchase a car. While auto finance may seem intimidating to some folks, it is not as complicated if you take the right steps and know what you're doing. Since auto financing is the first step towards getting a new or used car, it pays to do your homework and find out the best tips for you so that you can get the most out of your investment.

Why do People look for Auto Finance?

Once you choose a vehicle you're interested in buying, you will have two options: either pay the entire amount of the car upfront or opt for auto finance and make smaller payments that are spread throughout several months. If you are the latter, then this article is going to be for you.

Choosing the Right Option

Auto financing comes in several types, which makes it easier for people to choose the option that suits their financial situation. However, this is where many people make the mistake of not considering the pros and cons of each financing option and end up having to pay more than they had bargained for.

To ensure that does not happen to you, it is advised to educate yourself on the different types of auto financing options available in the market beforehand.

Online Auto Loans

The internet has changed how we do pretty much everything these days, including auto finance, and that's a good thing. Nowadays, one can choose from several online auto loan options. Of course, these auto loans are processed remotely, with the customer not having to visit the bank or any other financial institution during the initial stages.

The good news is that the steps of taking out an online auto loan are very similar to those of traditional loans, which means that if you have taken out a loan in the past, you will already be familiar with the process.

Another major advantage of taking out an online auto loan is that these are considered express loans, as in, they take just a few hours or a day to process. After which, you are given the financing you need to go ahead and purchase a new or used car from the dealership.

Since the entire process of online auto loans is carried out online, it makes it easier for users to find and compare several lenders so that they can make a more informed decision. Customers have the freedom to choose between direct and indirect financing options as well.

For instance, direct financing is when you choose a lender on your own, while indirect financing is when you opt for a third-party lender that's recommended by the auto dealership. The latter is a common option for those individuals with bad credit who are looking to secure auto financing.

Dealer Financing

As the name implies, dealer financing means shopping for the best auto financing option that's recommended by the dealership. Of course, the auto dealership you will be using will likely check your credit score but don't worry.

Dealership or indirect financing is the go-to option for those looking to finance a car but with a bad credit history. This means you will get to choose from several auto finance options that are provided by the dealership, regardless of your credit score.

The last option when it comes to auto financing is credit unions or banks that offer auto loans. These are tougher to get since they almost always require the customer to have a stellar credit history report, which means not having one will almost certainly mean that your loan application gets rejected.

Maintain a Good Credit Score

While we did mention that you can get auto financing despite having a horrible credit history, that usually entails paying higher interest rates, which consequently means higher monthly payments. On the other hand, if you do maintain a somewhat decent credit score, you could save yourself from having to pay those higher monthly payments.

Even if you have not thought about your credit score until now, it pays to find ways to improve your credit score. If you plan on purchasing a car in the not-so-distant future, then talk to your bank or credit card company to find ways in which you can improve your overall credit history.

Apply for Pre-Approval

Applying for an auto loan pre-approval gives you leverage during the negotiation process. If you walk into an auto dealership with a loan pre-approval, you can bargain with the price and even the amount of monthly payments and the rates. Since pre-approvals will not negatively impact your credit standing, it's smart to get a loan pre-approval from several lenders to compare the prices and know exactly how much car you can afford.

Read Between the Lines

With the proper documentation, you don't have proof of a deal. That documentation can also become the reason for a dent in your savings down the line if you don't read the fine print before you sign.

As a rule of thumb, whether it's the auto financing agreement or the documentation provided by the dealership, always read them first. Ask questions if you do not understand the jargon or the terms of the agreement before signing on the dotted line.

Ending Note

You will need auto financing once you decide on buying a new or used car. The Internet Car Lot is the go-to online destination to get all the information you need on buying a new or used car online, including the best auto financing options, insurance, buying tips, and more. Feel Free to contact us for more information or Call us at 712-220-9900