Understanding Vehicle Financing
Once a consumer decides to purchase a vehicle, they typically have two payment options:
- Pay cash for the vehicle. This option allows the consumer to provide the dealership with a cashier's check to pay for the vehicle. There is no loan for the vehicle.
- Finance the vehicle. This is the most common way to pay for vehicle. This option allows the consumer to make monthly payments to a lending institution (typically a bank or credit union) in order to pay for the vehicle.
Although consumers can obtain vehicle financing from a credit union, on-line banking, and other places. Dealerships also arrange financing for consumers purchasing a vehicle.
For the vehicle buyer, dealership financing offers:
- Convenience – Dealers offer buyers vehicles and financing in one place.
- Multiple financing relationships – The dealership’s relationships with a variety of banks and finance companies mean it can usually offer buyers a range of financing options.
- Special programs – From time to time, dealerships may offer manufacturer sponsored, low-rate programs to buyers.
- Get more information from the American Financial Services Association Education Foundation. This association provides a consumer booklet with useful information.