How Does Car Financing Work?

car signing
 

What does it mean to finance a car? Simply put, financing a car means you take out a loan from a financial institution and pay for your car in monthly installments. At the end of the financing term, you own your vehicle. That’s different from leasing a car, which involves paying every month for the use of a car that you’ll return to the dealership at the end of the lease term. Having trouble deciding whether you should lease or finance your next vehicle in Waco? Read on for an overview of how car finance works form the finance team at Allen Samuels Dodge Chrysler Jeep Ram FIAT.

What Does it Mean to Finance a Car?

It’s not uncommon for new car buyers in Woodway to contact us with one key question: “What is financing a car?” If you’re just starting to learn how car finance works, the process can seem daunting — so we hope this guide can demystify the car-buying process for first-time buyers! 

The first step is choosing a lender. Most drivers chose to apply for a loan through the dealership, a bank, or local Temple-area credit union. You can also apply to multiple institutions and then choose the best offer. Lenders will use the following factors to determine your eligibility for a loan, as well as how low of an interest rate to offer you:

  • Credit Score
  • Loan Amount
  • Age of the Vehicle
  • Debt-to-Income Ratio
  • Repayment Term / Length of Loan

What does it mean to finance a car with no credit? No credit or bad credit car loans are possible, but be aware that your interest rate will be significantly higher. Give yourself a few months to boost your credit before you apply, or find a cosigner with good credit.

Find the Financing Plan That’s Right for You

What is financing a car going to cost you each month? There’s a lot to consider, so we recommend calculating what you can afford in auto payments each month before you apply. Here are a few points to keep in mind as you plan your budget:

  • Low or no credit? A bigger down payment may help convince lenders to offer better interest rates. Calculate your max downpayment before you apply, and value your trade-in with Allen Samuels Dodge Chrysler Jeep Ram FIAT to offset your new vehicle cost with the value of your current car.
  • Include the cost of gas, insurance, and maintenance as you write up your budget. While it’s true that higher monthly payments will save you money on interest, you don’t want your car payments to be so high that any unexpected setback puts you at risk of missing a payment — and damaging your credit.
  • If you apply to multiple financial institutions, submit all applications within a 2-week period. Otherwise, your credit score could take a hit before you finish all of your loan applications.
  • What is financing a car going to cost compared to leasing? Monthly lease payments are lower than finance payments, but you have less freedom to customize your car and may be subject to mileage limits.
  • Get the best possible price and interest rates! It’s often possible to negotiate with your lender before loan terms are finalized.
signing contract

Find Your Next Car for a Great Price at Allen Samuels Dodge Chrysler Jeep Ram FIAT 

Ready to move forward with your favorite new Chrysler or Dodge vehicle in our 2020 inventory? Our team is here to make sure you drive home to Gatesville in the model you love! Contact our finance center with any further questions about how car finance works, or fill out a financing application online to get started today.

More from Allen Samuels Dodge Chrysler Jeep Ram FIAT

  • 2021 Jeep Grand Cherokee L Overview

    Gatesville, did you know that the Jeep Grand Cherokee is one of the most awarded SUVs on the market? If you’re looking to elevate your Jeep experience, the Jeep Grand Cherokee L will pique your interest. You can expect top-of-the-line features, advanced technology, extended legroom, and more. Allen Samuels Dodge Chrysler Jeep Ram FIAT in Waco is here to match you…

  • 2022 Jeep Grand Wagoneer Interior

      The Jeep Grand Wagoneer has been turning heads, and it’s no wonder why. This luxury SUV would make a beautiful addition to any Woodway driveway. But just wait until you see the beautiful 2022 Jeep Grand Wagoneer interior. Not only does this car look great on the inside, but there’s plenty of room, and you…

  • 2021 RAM 1500 Gas Mileage

    While it’s known for its class-leading pulling power, the RAM 1500 fuel economy will also surprise many Woodway drivers. The RAM 1500 mpg ratings can help you get up to 23 mpg city and 33 mpg highway. Learn more about the RAM 1500 gas mileage and fuel-efficient features with Allen Samuels Dodge Chrysler Jeep Ram FIAT, and take a test drive…

Saved Vehicles

SAVED VEHICLES

You don't have any saved vehicles!

Look for this link on your favorites:

Save

Once you've saved some vehicles, you can view them here at any time.

Contact Us

(254) 772-1000

Call Now

201 W. LOOP 340 • Waco, TX 76712

Get Directions

Today's Hours:

Open Today! Sales: 8am-6pm

Open Today! Service: 8am-4pm

Allen Samuels Dodge Chrysler Jeep Ram FIAT 31.5097545, -97.188118.