Consumer Portfolio Services is a financial service provider that specializes in auto financing. The process of auto financing can be a bit confusing, particularly for first-time car buyers. Understanding the basics of auto financing however, can help to ensure that you make an educated decision when it comes to selecting the right car and loan.
Know Your Credit Score
The single most important factor when auto financing is your credit score. Knowing your credit score is essential for two reasons; one is so that you know how much you can realistically borrow, and the other is so that you can gauge the kind of interest rate you will be offered. Before beginning the search for a car, it pays to check your credit score first so that you can adjust your expectations accordingly.
Shop Around for Lenders
There are various financing options available for car buyers, from dealerships, banks and online lenders. It pays to shop around for the best deal and compare the offers across lenders. Questions to consider include, the type of finance product being offered, specific terms and conditions, annual percentage rate and fees involved.
Calculate Monthly Payments
It’s easy to get swept away with the excitement of buying a new car, but in doing so, buyers risk getting into a financial situation they may not be able to manage. Estimating the costs associated with different loan amounts, interest rates and time period can help you determine whether or not a certain loan is right for you. This can be done using the many calculator tools found online.
Leasing vs Buying
Depending on one’s financial situation, leasing and buying both have their respective benefits and drawbacks. When it comes to purchasing a car, generally speaking there are three main options available; buying outright, taking out a loan or leasing. Being aware of the pros and cons associated with each approach can help buyers make a more informed decision.
Down Payments
In most cases, auto loans usually require at least a modest down payment. The amount of this down payment is determined by credit score and loan type. Opening up a savings account specifically for this purpose, is a great way to prepare for the eventuality of needing to make a down payment. The higher the available down payment funds, the greater the chance of securing a reasonable loan.
Gap Insurance
One thing to consider when auto financing is gap insurance. Gap insurance provides coverage for the difference between what you owe on the loan and what your insurance company will cover in the event of an accident. This can provide important relief, particularly if you’ve taken out a loan with a large sum.
Be a Knowledgeable Consumer
Being a knowledgeable consumer is key when it comes to auto financing. Doing research on the different financing options available can help ensure that you choose the best deal for you. Consider the various fees involved, such as application fees, processing fees etc., and be sure to obtain all relevant documentation upfront to avoid any confusion.
With some careful consideration and planning, auto financing can be a stress free experience. Knowing your credit score, shopping around for lenders, calculating monthly payments and understanding the pros and cons of leasing versus buying are all important steps to take when auto financing. Ultimately, the aim is to walk away feeling confident that you have made an informed decision.