New Car Financing
New car financing options make owning a car a possibility for many customers. Most prospective buyers will not be able to simply pay the asking price for right out of their own bank accounts. They will refer to a loan company or bank for their new car financing.
Whether they choose to lease or buy, the new car financing experience will be a very detailed, involved process comprising checking a person's credit history, refinancing, motor vehicle insurance, and of course, customer preferences. Many people assume that the details of the new car financing portion will be the last step in the car buying process, and are seriously taken aback when they find out that the sales agent will check credit history even before negotiations begin. What this means is that, a person's credit history is being taken into account from the very beginning when the salesperson gives the very first indication of the price they want to be paid.
The Finance and Insurance Room
When a prospective customer shows up on the sales floor of a car dealership, one of the very first things that happens once the customer indicates the vehicle of interest and seriousness of intent, is that the sales person asks about the new customer's intentions for financing the vehicle. The customer, if not making one cash payment, or if he or she has not already made payment arrangements with a bank or other lender, will be able to choose between getting a loan or a lease through the dealership. If the customer accepts one of these options, the very next thing that the sales person will do is check the prospective customer's credit history.
They will look at vehicles, discuss prices, consider options, talk some more about prices, test drive the vehicle or vehicles that the new customer is most interested in, and engage in more extensive financial negotiations. The new buyer will eventually make a final determination on issues such as whether to accept the proposed new car financing for buying or leasing, whether to accept the offered trade-in value of the old vehicle, and how much of a down payment to make.
Once both parties are satisfied that they have an agreement, and if the prospective customer's credit application was acceptable, things will be put on paper. If the credit report shows that the new customer has a very good history, the dealer's agent will offer a low interest rate, and possibly enroll the customer in other special dealership or manufacturer's programs that could help lower the costs even more.
The opposite is also applicable. The finance and insurance department of the dealership will charge a higher interest rate if the customer has bad credit or a very limited credit history. A young person with no credit history whatsoever, buying a first vehicle, might be required to have a guarantor, with excellent credit, who will co-sign the new car financing agreement.
One of the questions that the new owner will need to answer as part of the new car financing process, is how quickly he or she would like to pay off the loan. Vehicle loans can last up to sixty months, or five years, but could be any length of time below that, depending on the amount of the down payment and the size of the monthly payments that the customer is willing or able to make. The title will remain in the possession of the financing company until the car is fully paid off.
New car financing options for leasing work a little bit differently. If the customer elects to get a lease, and the credit history check shows acceptable information, the dealership will find arrange that through their financing and insurance office, also. The customer will be asked to decide how long the lease will be, and will negotiate with the lease financing office on such things as how many miles the vehicle may be driven each year and on the amount of the down payment.
General advice is that the customer limit the lease financing term to three years and pay as small a down payment as it would be possible to get away with. The new customer should ask for a "drive off fees only" agreement which would do away with a considerable portion of the possible up front payments.
The new car financing lease paperwork will have clauses about a possible residual price, the amount that the car will cost, if at the expiration of the lease the customer wishes to purchase if from the company. This is not generally set in stone, because companies will charge customers for what they deem to be excessive wear and tear on the vehicle, or might be willing to consider a lower price if the car was kept in very good condition.
