Guide to financing a car
If you’re in the market for a new car, you have a few options for getting yourself on the road.
Some car buyers choose to lease a vehicle. This option is like renting an apartment, but for a vehicle and may be appealing to buyers looking for less commitment than purchasing a vehicle.
If you want to own your car without paying for it outright, you can finance the car instead. This is a better option for people who want to have full ownership of their vehicles after completing their scheduled monthly payments.
Here’s what you need to know about financing a car.
What is financing a car?
When you finance a car, you take out a loan to purchase the vehicle and then pay back that loan over time. As with other types of loans, you must agree to pay back the amount you borrowed as well as interest and fees. You’ll make scheduled payments to your loan financer, usually monthly, to remain in good standing on your car loan.
You can finance a car through almost any financial service provider. Car financing may be provided by banks like Chase, but they are also provided by credit unions, online lenders, and manufacturer financing groups.
To obtain financing, the financial service provider will check your credit report and credit score. If your credit score is high, you’ll have a higher likelihood of being approved for a loan and you could secure a lower interest rate on your car financing payments. If your credit score is low, it doesn’t necessarily mean you’ll be disqualified for a loan, but you could have to pay a higher interest rate.
Lenders must provide you with the terms and conditions of your loan before you agree to them. It’s important to read this information thoroughly, so you understand what’s expected of you and how much you’ll need to pay each month.
This process can sometimes seem complicated. But if you take it step-by-step, it’s straightforward. Below, we’ll go over how to finance a car so you can make an informed decision about your vehicle purchase.
How do you finance a car?
Traditionally, financing a car often meant going to a dealership. After picking out your vehicle, the dealer would help you obtain financing through a lending provider, which would be a local or national bank, or even the manufacturer finance group itself.
Now, you can shop for vehicles and even obtain car financing online. Before doing so, here are a few steps you should take.
- Check your credit score
It’s good to know your credit score before you start shopping for a loan. You can use Chase Credit Journey® to check your credit score for free and receive alerts whenever your credit score changes. You are also entitled to a free annual credit report from annualcreditreport.com, the government-authorized website for free credit reports.
- Get prequalified
To take the guesswork out of car financing, it helps to get a clear picture of how much you can borrow. Chase makes this easy with its prequalification tool. Just input some basic information to get an idea of how much you can borrow. Keep in mind that this isn’t a loan application or a guarantee of financing.
- Find the car you want
Now, focus on the fun part: finding your new car!
You can look for cars in person or shop for a car online. You can browse online inventory from home, which provides a tool to help you to find your dream car that fits within your budget simply by answering a few questions.
- Apply for financing
Once you find the car you want at a price that matches your budget, you can start applying for financing.
You can finance your purchase from many types of lenders, including online lenders. But you can also apply for financing directly through Chase’s website. Just navigate to the Finance a Car page to get started.
What is the best way to finance a vehicle?
When financing a vehicle, you’ll have some decisions to make based on your preferences and personal finances. Here’s what to think about.
Choosing loan terms
In some cases, you may be able to choose between different financing terms.
The length of your loan term may vary. You could get a loan term as short as 36 months or as long as 72 months. The shorter your loan term, the higher your monthly payment may be. Your loan term choices may be dependent on your credit report and other criteria from your financing institution.
Financing online or in-person
You can also choose to finance your car online or in-person. In the past, most people financed their vehicles by meeting with a representative of their bank or by obtaining financing through a dealership.
Now, major banks like Chase allow you to obtain financing online and work with a network of trusted dealerships through the car buying process. The choice is yours, but financing online is becoming increasingly popular due to its convenience.
In summary
Buying your next car should be an exciting experience. It pays to be informed before you start applying for financing so you can focus on finding the car of your dreams and getting out on the road faster.
