Auto Loans :
If you're like most people, paying cash to buy a new car just isn't in the realm of possibility. And even if it's in the realm, you may not want to deplete your savings account to buy a new vehicle. This means that you're either going to be leasing the cars, or buying the cars by financing it. If you're buying, then you're probably financing it through the dealership, a bank or credit union, an online financial institute, or maybe even a family member.
While leasing is good for a lot of situations, it's a whole other animal and has its own article. In this article, we're focusing on financing. If you know you want to finance your car rather than pay cash, then you need to do your homework and decide how to get the best financing deal.
Financing Sources - Pros and Cons:
1- Dealership Pros: Convenient, fast, sometimes competitive Cons: High pressure, usually not competitive; be prepared for a big sales push on add-ons; loans are often front-loaded (payments are made up of more interest in the beginning of the loan than toward the end -- that's bad if you think you may be paying the loan off early.) 2- Bank or credit union Pros: Competitive rates, personal service, no sales pitch for add-ons; often can tell you if you're paying too much for a car; often provide free life insurance or disability insurance with loans; loans are usually simple interest loans (interest spread evenly throughout the term of the loan) Cons: Not as convenient as dealership financing -- can't set it up at night or on the weekend
3- Online financial institution Pros: Usually competitive rates, quick, easy Cons: Not a personal service; dealing with an unknown; some scams to watch out for
4- Home equity loan Pros: You can deduct some of the interest from your taxes; competitive rates Cons: You're tying your car to your home (may be risky)
5- Family member or friend Pros: Personal service, easy, sometimes flexible; usually competitive rates Cons: Could jeopardize a relationship.
