Sources of Auto Financing

There are several sources of auto financing and below, we shall look at each of them and their advantages and disadvantages:

1. Dealership financing: It is important to know that when you decide to finance a car through a dealership, the deal you get is not conclusive. This is because the finance person is working on a commission and there are several things that will be added on the final stages of the deal, and this is where the dealership makes their profits and an example is alarm systems, extended warranties and so on and this is a major disadvantage.

Another disadvantage is the fact that loans are usually front- loaded meaning that the payments are structured in a way that the interest is paid off more in the beginning than in the end. Dealership loans are also not competitive and therefore, one may tend to get very high interest rates.

It has some advantages however, such as convenience and being fast. One can actually select the car they want to buy and get the financing there and do all the paper work at the same place all at nearly the same time.

2. Private Party Auto Financing: This is the same as a person-to-person loan and the advantage of this is that it is a personalized service as you are dealing with an individual you know; it is easy and sometimes flexible. The major disadvantage is that it can jeopardize a relationship if one default on the loan repayment.

3. Credit Union or Banks: Getting auto financing from a bank has several advantages than the disadvantages. Since there are several of them, their rates are usually competitive and one can get a good deal, their service is also personalized and this is good as one can get advice such as if you’re paying too much for a car or not. Their loans are also simple interest loans meaning that the interest is spread out evenly throughout the repayment period.

A major disadvantage, however, is that it is inconvenient as one has to do it during normal working hours and can’t be done at night or over the weekend like in dealership financing.

4. Online financial Institution: This is auto financing offered over the internet by some organizations and the advantages are that it is very quick and easy and the rates are very competitive. Because of the fact that it is also not a personalized service, one needs to be very careful lest it is a fraud.

5. Home equity loans: It can be a good option to get this because the rates are usually competitive, and it can be worked out in a way such that the interest is deducted from taxes. A disadvantage, however, is that it can be risky to tie a car to a home in case of default.

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