Car Loan Finance and Refinance Guide

Everyone wants a new car, but its all about the money – isn’t it always ! Getting a loan or credit can sometime seem a bit daunting, wondering if you’re being ripped off, or could get a better deal somewhere else. Speak the language and you’ll know what they are saying.Some of the most common questions are :

– What is a good interest rate on an auto loan?

– Can I refinance my car with bad credit ?

– What happens when you refinance your car loan ?

– How does the interest on a car loan work ?

– Can you use a personal loan to buy a Car ?

Read on : Credit simply means using someone else’s money to buy the car, but also having to pay them back, usually with interest, over a fixed period of time.

auto credit finance

Auto Finance, Credit and Refinance explained

Borrowing money to buy a car is normally done in one of two ways. The money can be borrowed from a bank, credit union or some other type of finance company, possibly online, and this is normally referred to as direct lending. Credit can also be arranged through the car manufacturer themselves and through their dealerships, and this is normally referred to as dealership financing. The whole process of auto finance / auto credit also includes the buying or leasing of all vehicles, including cars, trucks, motorbikes, RV’s, tractors and all commercial vehicles.

DIRECT LENDING

Direct lending simply refers to the process of trying to obtain credit or a loan from a bank, credit union or similar institution. A car loan will often be referred to as a secured loan, meaning that the lender has a right to repossess the car if the contract is broken.  The process of applying for credit or a loan will involve filling out an application form, normally on-line, giving a significant amount of personal information about  the individual themselves, possibly their families as well and possibly their business interests and contacts. The application form will be the basis of any contract that is agreed between the lender and the applicant, and will form the basis of any loan agreement. The applicant will be allocated a credit score, which  will be used as the basis for deciding whether or not to lend the applicant any money, and if so on what terms and conditions.

CREDIT SCORE and CREDIT REPORT

Understanding your credit score is a really important part of the whole process of arranging any type of auto credit or auto finance, and is more fully explained here. In essence, a credit score is a number that is allocated to an individual, set within a range of two other numbers. As an example, someone might have a credit score of 350, set within a range of zero and 700. The credit score is allocated to the individual by a credit rating agency, who will collect a significant amount of personal data about the individual, and use that information to make a judgement about what they believe the credit status of that individual to be.

It is important to understand how a credit score is made up, and what the various factors are that affect an individual’s credit rating. In large part this is because there are things that the individual can do to either change or improve their credit score. This can have a significant impact on their being able to secure a loan at all, and can often hugely impact the terms and conditions of any loan or credit agreement that is agreed.

BAD CREDIT CAR LOANS

People often worry about bad credit because they assume it means they end up with  a worse deal or no deal when trying to buy a car, and of course to some extent that is true.Its important to understand what is meant by bad credit, and the difference between bad credit and no credit. Bad credit is a relative term, and different lenders will take a different view on what it means, and reflect it in their rates and terms and conditions. A credit score is affected by many different things, and it is a good idea to familiarize yourself with what they are. Major things like bankruptcy or a loan default can only be used in a credit report for a specified period of years which is why it is a good idea to check it before applying for a loan.

REFINANCING CAR LOANS

Many people don’t consider the option of refinancing a car loan, but it can in fact often be done very easily, and can sometimes make a significant difference in terms of either getting a better interest rate, or better terms and conditions, than the original auto credit deal. It often also make sense to refinance a loan of the original loan is in its early stages, as this is when the majority of the interest on the loan will often be paid, standard in most auto finance deals.

CAR LOAN RATES

Lenders tend to charge higher rates for used or older cars partly for historical reasons, partly because they assume they are more of  a risk. The main element of deciding rates is the credit score of the individual, but because it is normally a secured loan, some attention is paid to what would need to happen if the car was repossessed and had to be sold. There is some anecdotal evidence that credit unions offer better rates, truth is most of the real savings when buying a car come from negotiating the price, extras, and finance terms generally.

PERSONAL LOANS

Personal loans are what are normally referred to as unsecured loans, meaning they are not based on the lender having a right to repossess anything if the person defaults on the loan.This also means that a higher interest rate is normally charged as there is  a higher risk from the lenders point of view. Personal loans are not usually used in auto finance deals, but people may be tempted if they find getting credit difficult. They may also be tempted to arrange pay day loans if they get into financial difficulties. These should be avoided at all costs and other options looked at, especially refinancing.

LEASING

Leasing a car or truck has become much more popular in recent years, in large part thanks to a dedicated effort by most manufacturers to push this option as an alternative to buying a new car outright. Many people used to think that leasing a vehicle was simply something that happened in the commercial part of the market. Manufacturers have gone to great efforts to re-brand this belief, making personal leasing plans a serious option.

It is worth thinking of leasing a vehicle has been similar to a long-term rental, albeit with some significant differences. The concept of a rental does work however, in that the individual does not actually own the vehicle outright, and at the end of the lease agreement will return it to the manufacturer, often with an option to buy it outright if they want to. The main advantage of releasing difficult for many people is that it gives them a chance to essentially ‘own’ a new car when they would not otherwise be able to do so. For many people the allure of a new car takes priority over other things, and it is to this market that manufacturers largely appeal.

AUTO INSURANCE

When arranging a type of auto finance or auto credit in order to buy or lease a car, it is worth remembering that the lender may well insist on a more extensive level of insurance cover than is either required by law, or which the individual would simply arrange for themselves if they were paying cash for the vehicle. A lender is likely to want to make sure that the individual has  very specific auto insurance in place, and this will normally be one of the terms and conditions of the loan agreement.

Some manufacturers have arrangements with certain insurance companies who are likely to offer favourable rates if the insurance is placed through them, although this should never be a specific part of the loan agreement. The cost of auto insurance should also be a factor when determining what’s type of car or vehicle to buy, and how much to apply for by way of loan or credit agreement.

GAP INSURANCE

Gap Insurance is different to other types of car insurance, and is designed to meet the difference between the sale or market value of the car when sold, and its subsequent value after  depreciation if it is involved in any type of accident right off. There is a common misconception about the value of a car in terms of its insurance value and its market value. In insurance terms, if a car is written off or so badly damaged that it cannot be replaced or repaired, the insurance company should pay its actual market value, based on age, mileage, condition etc. This is  usually significantly less than the individual paid for the vehicle, which can obviously lead to a high degree of friction in the event of an insurance claim, and a knock on effect on any future auto credit deals.

AUTO FINANCE /  AUTO CREDIT – VEHICLE PROTECTION PLANS

Vehicle protection plans one of a wide range of different types of extras that can find their way into the final sale price of any car or vehicle that is bought or leased under any auto credit deal. These plans normally refer to various types of what normally known as warranties or extended warranties. They can vary hugely in terms of their benefit and cost. They can also vary as to what they include in terms of mechanical breakdown, roadside assistance, tire and wheel protection, servicing and maintenance plans etc.

These optional extras can also include things like appearance protection, windshield repair connection, Dent and Ding protection, key replacement costs, theft protection etc. Depending upon the manufacturer and whether the car is new or used, a lot of these vehicle protection plans will either be free or be offered at an additional cost. It is important to know what is included in the final sale price for agreeing any contract, as this will be a key element in determining how much to apply for by way of a loan application.

AUTO FINANCE / AUTO CREDIT – LOYALTY OFFERS

Most manufacturers offer some type of loyalty offer, which is often simply a time for some type of discount. Some will refer to people as valued owners, more commonly called repeat customers. A lot of loyalty offers are aimed at people who are active or who have served in the military, at students or college graduates, at people who have mobility problems. There are also often a significant number of deals that are offered on specific models of vehicle, at specific times of the year.

This is part of a broader issue of how someone should research the true cost of what they need to pay for any particular type of car or vehicle, and how they arrange auto credit accordingly, but suffice to say there are a number of ways that it can be significantly reduced. This will obscure effect the amount needed to finance the purchase or lease agreement, and seven understanding of what the actual cost of a vehicle may be should be undertaken at the outset.

DEALERSHIP FINANCING

Virtually all major manufacturers offer some type of finance or credit arrangements to potential customers, all of which will be subject to status, and which will be assessed on the same basis as a normal secured loan. Some customers find it helpful to arrange the finance at the same time or point of contact as buying the car, which can make a lot of sense. even so, it is always a good idea to get alternative quotes and compare them on a like for like basis.

AUDI – AUDI FINANCE

BMW – BMW FINANCIAL

CHRYSLER – CHRYSLER FINANCIAL

 – DODGE : DODGE FINANCING

 – FIAT : FIAT FINANCE

 – JEEP : JEEP FINANCING

 – RAM : RAM FINANCING

FORD – FORD CREDIT or FORD FINANCE

 – LINCOLN : LINCOLN FINANCIAL

GENERAL MOTORS or GM or GMC

 – BUICK : BUICK FINANCING

 – CADILLAC : CADILLAC FINANCING

 – CHEVROLET OR CHEVY : CHEVROLET FINANCING

HONDA – HONDA FINANCIAL

 – ACURA : ACURA FINANCIAL

HYUNDAI – HYUNDAI MOTOR FINANCE or HYUNDAI FINANCE

JAGUAR – JAGUAR FINANCE

LANDROVER – LANDROVER FINANCE

KIA – KIA FINANCE

MAZDA – MAZDA FINANCE

MERCEDES – MERCEDES -BENZ FINANCE

NISSAN – NISSAN FINANCE

 – INFINITI : INFINITI FINANCE

PORSCHE – PORSCHE FINANCE

SUBARU – SUBARU FINANCE

TOYOTA – TOYOTA FINANCIAL

 – LEXUS : LEXUS FINANCIAL

VOLVO – VOLVO FINANCIAL

VOLKSWAGEN – VW FINANCE