The Complete Guide to Auto Financing

The first step in purchasing a vehicle is understanding the world of auto financing so you can be prepared to make the best decision for your situation. It can be intimidating trying to comprehend financial jargon, but with Lee Nissan's complete guide to the auto financing world, you can be confident in your decision. Keep reading to learn how to navigate auto financing stress-free.

What is Auto Financing?

Auto financing allows you to purchase a vehicle, typically through a loan, even if you can’t pay the full price upfront. You’ll borrow money from a financial institution with the intent of paying the amount back, plus interest, in monthly installments over a set period of time.

• Dealership Financing: Many dealerships have financial institutions that they partner with to offer financing opportunities.
• Direct Landing: A loan is secured from a finance company, bank, or credit union, and you pay them back the borrowed amount.

Key Auto Financing Terms to Understand

• Cosigner: This person acts as your backup if you fail to make a payment. Individuals with a low credit score use cosigners to secure a loan.
• APR (Annual Percentage Rate): The cost of the borrowed money is typically seen as a percentage.
• Equity: The difference between your current loan balance and the value of your vehicle. Positive equity refers to when your vehicle is worth more than you owe, and negative equity, also known as being “upside-down” on a loan, refers to when the vehicle is worth less than the loan.
• Down Payment: How much money you put toward your initial payment. You can reduce your monthly payment when you put more toward your down payment.
• Balloon Payment: Paying a large sum at the end of your loan after making smaller payments for the duration of the loan.
• Term: This refers to the amount of time you have to pay off a loan.
• Refinancing: When you replace your current loan with a new one in hopes of receiving a better interest rate or if you want to adjust the loan term.
• Principal: How much the loan costs without interest.

How to Get the Best Financing Deal

There are several steps you should take to ensure that you receive a favorable financing deal. The first step is to check your credit score. Your credit score plays a significant role in determining the interest rate that you will be offered. Knowing your credit score can help you assess the offers so you can make the best decision for you. Don’t accept the first offer you receive; shop around and compare offers from different lenders so you can feel confident in your decision. Remember, you can negotiate almost every aspect of the car-buying process, and if you don’t like an offer, then have the confidence to walk away. Before signing the dotted line, ensure you have read the terms and conditions thoroughly and fully understand the agreement.

Potential Pitfalls to Avoid

While you are also navigating the difficulties of auto financing, you should also be aware of several potential pitfalls. Be wary of accepting longer loan terms because while the monthly payments are smaller, they typically will accumulate more interest over time. You should also be aware of offers that don’t require a down payment because they can result in greater costs throughout the loan’s duration. You’ll also want to avoid rolling over debt from a previous vehicle purchase. Trading in your current vehicle before it’s fully paid off can result in the remaining balance being integrated into your new loan, which can inflate the loan amount.

Get Simple Auto Financing at Lee Nissan

Our experienced finance department is here to help you understand the basics of financing, helping answer any questions you may have about the car-buying process. You can depend on us to provide you with favorable finance options tailored to your situation.

Stop by the Lee Nissan dealership when you’re ready to start financing a vehicle. Our team will work with you so you can feel confident in your decision. We look forward to your visit.