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How Does Car Financing Work?

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When you’re looking for a new car, there are a few purchasing options to consider to ensure you make the best decision for your transportation needs and budget. You can buy your vehicle outright, which means you pay the entire cost of the vehicle upfront. You can also lease a vehicle, which essentially means you’d be renting it for a period of time. So, what does it mean to finance a car, and how does financing work? We’ll answer those questions to give you a better understanding of the buying process, and then you can browse our new vehicle inventory to see what vehicle you’d like to finance.

How Does Financing a Car Work?

When you finance a vehicle, you borrow the money to pay for the vehicle from the dealer, a bank, or other financial institution. The lender purchases the vehicle outright, and the buyer repays the lender with interest, and the lender owns the vehicle until the payments are finished. Various factors influence your eligibility for financing, including:

  • Credit score
  • Loan amount
  • Duration of loan
  • Debt-to-income ratio
  • Vehicle age

If you have a poor credit score, you should spend some time working to improve it before trying to purchase a vehicle. You might also be able to find a close friend or family member who’s willing to cosign the loan, which will improve your chances of obtaining a loan and lower your interest rate. 

Choose a Lender

After you apply for financing, the next step is to choose the best lending terms for your budget. Different lenders will offer different loan durations, interest rates, and ultimately, monthly payments, so it’s critical that you do your due diligence to make the best decision.

Want to Know More About Car Financing in Wayne?

Now that you know more about how car finance works, feel free to contact us if you still have questions about the buying process. And if you’re ready to get behind the wheel of a new car, truck, or SUV, you can apply for financing online and get approved in minutes! At Performance Auto Group, we’ll work with you to get you in the driver’s seat of a high-quality new or used vehicle, even if your credit score isn’t perfect.

 

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