Finding the right financing option for your new car purchase is one of the most important steps in the process. Your ability to get the right loan amount and your repayment terms will have a huge impact on the range of vehicles you can choose from, and new vehicle loans work a bit differently from their counterparts on the pre-owned market. That means a lot for drivers making the transition from pre-owned vehicles to new purchases.
New vehicle loans are typically available through both traditional bank loans and dealership financing. Depending on the dealership, this can mean different things. Sometimes, it means that they have partnered with a variety of local banks to help negotiate the best rates available for each customer. Other times, it can mean that they provide self-financing options, allowing them to handle payment terms directly with the customer. This can include special rates such as zero percent financing windows, but since those terms are very specific to the dealer, it’s important to review the entire agreement.
No matter what kind of financing you are looking at, there are a few things you need to compare:
- Repayment time
- Loan size
- Insurance costs
Finding the Balance
The truth is, there’s usually not one best option for vehicle financing. Some customers will do better at their own bank, and others will find that the dealership’s financing offers them far more preferable terms than they can get on their own. To keep your options open for as long as possible, the key is to shop around and follow these tips:
- Get pre-approved from at least one bank. That way, you have an offer on the table to compare your other options to.
- Decide whether you would rather have a larger loan, a lower interest loan, or one you can repay faster. These considerations should be balanced against each other, too, so that no one feature is too extreme.
- When presented with options, don’t be afraid to talk about comparisons. Dealership financing departments will work with you to try to get you the best deal possible. If they know what a competitor will do for financing, it gives them something to try to beat.
Most new vehicle loans have terms that run between three and five years, but there are some banks and dealerships that will go out as far as an 84 month loan for the right car, which will allow you to buy a more expensive vehicle. However, the longer you finance, the more interest you will pay. Be sure to weigh all your options before making your purchase.