Navigating Car Financing Options
Anyone who has been through the car buying process can tell you that one of the biggest worries is, “How am I going to pay for this?” Buying a new or used car can be stressful enough without having to learn the details of leasing, buying outright or getting a car loan.
Here at Automopedia we have you covered with some details on some of the financing options available to you and how they work.
Leasing a Car
Leasing can be a great option for those who put 12,000 miles or less on their car. If you were to lease a car the dealership will ask you to fill out a credit application. While the dealership is shopping out your lease deal to the banks, you will need to decide how long you want your lease to last (between 3 and 5 years) and how much money you will put down.
Once the banks come back with your lease options the dealer will go over them with you. Generally the lease contracts will include monthly payment amounts (based on how much you put down), mileage caps and a residual value for the car that you are leasing. When the lease ends, you will be able to purchase the car outright for the residual price.
At the end of the lease you can trade it in for a new lease or buy the car. When the end of the lease nears, be careful of wear and tear and going over the mileage. If you go over the mileage specified in the contract you will be charged a certain amount per mile that you exceed the mileage cap. The dealer can sometimes charge for extra wear and tear which can further add to your costs. If you’re a person who likes to have a new car every few years, doesn’t have a long commute and doesn’t want to be bothered with maintenance costs leasing could be the option for you.
Buying a Car
If you are considering buying a car, the dealer will help you finance it. This means that they will ask you to fill out a credit application and bank that the dealer works with will specify the terms.
You will need to make a down payment on the car at purchase and then monthly payments will be due. The monthly payments will be determined by how much you put down, the interest rate and how long the car loan is for (usually 3-5 years).
During the time that you are paying off the car, the bank will hold the title, but once you pay the loan in full, the title will be transferred to you. Purchasing a car can be expensive at first, but over the long run it can work out to be cheaper than leasing and you can drive as much as you want without a mileage cap.
[SOURCE] http://www.edmunds.com/car-loan/car-financing-options.html
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