Financing A Car Through A Bank Or Dealership?

Many individuals may desire a luxury car, but the price is past their financial capability. Well, there are different financing options that can enable anyone to walk out dealership driving. The most common financing options that extend credit for a car purchase are through a bank or the car dealer. What most don't understand, however, is how each arrangement works. Although they both have a similar objective, certain elements are different when the long-term effect is considered. It is possible to save interest if you settle on the most appropriate plan, which is why it is important to learn the dynamics involved in vehicle financing. Let's start now!

How to Figure Out the Lowest Rate

A significant element in extended car credit is the interest payable over the loaning period. Wouldn't you wish to pay the lowest rate possible? Telling the difference between the rate of a bank and dealers interest is hard, and often, the dealers just act as agents for the banks. Figure out if the financing option you are accessing is on simple or pre-computed interest. The latter doesn't offer an option for early payments as you will still pay the same interest amount. If it's simple interest, paying early will save some interest charges. Considering a dealership has access to different banks, they can offer multiple financing options. Also, don't forget dealerships are allowed to mark up the interest rate and make a profit from the difference. Analyze all your options wisely as you consider all the factors before choosing.

Continue reading to learn about potential charges and penalties.