The lending process has become so streamlined and simplified that anyone needing financing will find the process much more bearable than in the past. With online banking and electronic applications, many institutions have reduced the amount of paperwork associated with financing and, in the process, have made financing more accessible to everyone. In Australia, alone, there are a number of online institutions that have made the process of securing financing easier than ever before.
In no way is this fact truer than with financing a car. Even as little as twenty years ago, consumers would find themselves waiting in the car showroom for hours as they worked through the details of a car loan with the salesperson. Today’s car loan lenders can have you out of the office in less time simply because most of the work of financing a car is done before ever shopping for the vehicle. Even with the ease of financing, shoppers should go into the lender’s office prepared.
Let’s take a look at some of the questions that consumers should ask their lenders before financing a vehicle.
What Are The Benefits Of Independent Financing Over Captive Financing?
In short, independent financing involves consumers searching for funding outside of the dealership where captive financing is completed through the dealership. While captive financing is definitely convenient, independent financing can offer consumers more competitive rates. Typically, credit unions, online financing companies and your occasional traditional institution will offer lower interest rates than those found through the dealership. Furthermore, a pre-approval letter through an independent financing institution can shortcut a lot of the paperwork associated with financing a vehicle.
What’s The Total Cost Of The Vehicle At The End Of The Loan?
Those looking to finance a vehicle should also pay attention to the total cost of vehicle after interest, sales tax, and other charges are included. To calculate simple interest, consumers need to multiply the principle x rate x time, and the result will tell you how much interest you should pay over a loan term. Most lenders, though, can tell you exactly what you have paid for by the end of the loan.
How Does A Down Payment Affect My Interest Rate?
Your interest rate is determined by the market and your credit score primarily. In fact, your own credit history greatly affects this rate. However, a sizable down payment can lower your interest rate as well. Financing a car with a down payment that will significantly lower the monthly is the best way lower both the payment and the interest rate.
How Might A Down Payment Affect My Monthly Payment?
If the down payment is large, it will not only result in a lower monthly payment, but it will also save you money down the line in terms of interest. If consumers save at least 25% of the total car’s value, they stand to significantly impact the total monthly payment. It is always good to go into any financing situation with a sizable down payment simply because it makes it easy to pay off the loan quickly.
Are There Any Pre-Payment Penalties Or Fees?
Another good question is to inquire as to the types of fees and penalties assessed for paying off the car early or making payments late. Knowing whether there are pre-payment penalties is always good because this can help you determine the length of the loan (3, 5, or 7 years). Also, be aware of late payment fees because they can add extras to the loan, which you should be aware of.
Asking The Right Questions
Consumers armed with the right information generally tend to gain the advantage when seeking car financing. Questions related to the overall cost of the vehicle and the fees and penalties are ones that can really help consumers incorporate a car budget into the rest of their financial lives. More importantly, answering these questions can make buying a car exciting and more importantly, ensure a much less stressful experience.