This month on the Hastings & Hastings blog, it has been all about automobiles. Here in Phoenix, a majority of individuals depend on their cars to get through daily life. Without their vehicles, they would be helpless. This is why having a car totaled in an accident can be devastating. Legal actions take time, but accident victims can’t just wait around to get their lives back on track. For this reason, we recommend carrying rental insurance. When it does come time to buy a new car, you are probably going to consider financing it. Today, we are going to talk about just that – financing a new car purchase.
There are several options you can choose from when it comes time to finance a car. One common option is to finance through direct lending. With this option, you obtain a loan directly from a financing company, credit agency, or bank. The benefits of going with direct financing are twofold. When using direct financing, you obtain the loan and use the money to purchase the vehicle. This means you know your credit terms ahead of time which can help direct your shopping. Because you obtain direct financing ahead of time, you have the opportunity to shop around and find the best deal.
A second option is dealership financing. With dealership financing, you select a vehicle then enter into a contract with the dealership to pay for the vehicle plus a set interest rate and a financing charge over a period of time. While some dealerships may retain the contract, many will sell it to a third party. Third-potential buyers are usually banks, credit unions, or financing companies. Most dealerships will offer multiple financing options and will work closely with you to find the one that works best. Financing through a dealership eliminates the need to financing independently through a third party which can be convenient. As a final benefit of financing through a dealership, you may be able to access special incentive programs.
Before committing to a loan or financing through a dealership, make sure you know exactly how much you can afford in terms of monthly payments. A quick and easy way to calculate what you can afford is to take 10-20 percent of your gross monthly income and subtract the amount you pay for your monthly insurance premium. Whether you select a percentage closer to 10 or 20 depends on how much of your income you wish to allocate to car payments.