October 12, 2007

Car Financing the Facts

Not everyone is in the position to pay cash for a car, whether new or secondhand, and is it even worth using all of your savings just to buy a car in the first place?

Looking at all of the options is the way to go, and these should look something like this:

Dealership

Pros: Convenient, fast, and 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

So it would appear that there is more to buying a car than just choosing the make, model and colour, time also is needed to shop around for the best finance package too.

Source [How Stuff Works]