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CarFinancing
Most car dealers offer a variety of
financing options for the purchase of cars, including loans
and leases.
Car Financing can be highly profitable for dealerships. There have
been some scandals involving discriminatory or predatory lending
practices, and as a result, car financing is heavily regulated
in many states.
For example, in the U.S. state of
California, there must be several warning signs posted in each
salesperson's cubicle, and the contract must contain several prominent
warnings, such as the words "THERE IS NO COOLING-OFF PERIOD. |
Are
you looking for a low interest auto loan? |
Before
you agree on car financing -
understand the terms.
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In the United States, most aspects of
operating a car dealership are regulated at the state level. Car
titles are issued and transferred by the individual states through
their respective Departments of Motor Vehicles. The purchase price of
a vehicle usually includes various fees which the dealer forwards to
the state DMV in order to transfer the vehicle's title to the buyer.
In many states, the DMVs also license and regulate car dealerships.
Car Financing Sources - Pros
and Cons
Dealership
Pros: Convenient, fast, sometimes competitive
Cons: High pressure, usually not competitive; be prepared for a big
sales push on add-ons; loans are often front-loaded (payments are made
up of more interest in the beginning of the loan than toward the end
-- that's bad if you think you may be paying the loan off early.)
Bank or credit union
Pros: Competitive rates, personal service, no sales pitch for add-ons;
often can tell you if you're paying too much for a car; often provide
free life insurance or disability insurance with loans; loans are
usually simple interest loans (interest spread evenly throughout the
term of the loan)
Cons: Not as convenient as dealership financing -- can't set it up at
night or on the weekend
Online financial institution
Pros: Usually competitive rates, quick, easy
Cons: Not a personal service; dealing with an unknown; some scams to
watch out for
Home equity loan:
Pros: You can deduct some of the interest from your taxes; competitive
rates
Cons: You're tying your car to your home (may be risky)
Family member or friend
Pros: Personal service, easy, sometimes flexible; usually competitive
rates
Cons: Could jeopardize a relationship
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Sources:
auto.howstuffworks.com, Wikipedia |