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Used Car Financing Options and Tips

By: StaffPublished September 10, 2021

Used Car Financing Tip #1: Cash or Credit?

When deciding financing car options, you first need to decide whether to pay for the entire car up front or to take out a loan. Take note that paying for the car in full is the ideal choice. This is because car buyers who take out loans to pay for their car wind up paying more for the loan, as finance and interest charges are added to the overall price.

Used Car Financing Tip #2: Buy or Lease?

Unfortunately, most car buyers cannot afford to pay for a car in cash. So, their next choice is to either buy or lease. The advantage of leasing a car is that monthly payments are generally lower. And because lease terms generally only last between 12 and 36 months, you get the advantage of owning a new car every few years. Leases also require little (if anything) in the way of down payments, meaning that if you are a less financially established car buyer, leasing allows you to drive a nice car for a relatively little investment. The major disadvantage of leasing a car is that you will always have a car payment, and you will never own the car. And if you do decide to buy the car when the lease is over, you will wind up paying more than if you decided to buy the car outright. Leases also have restrictions on how the car can be driven. For instance, most leases place restrictions on the number of miles a car can be driven each year (usually between 12,000 and 15,000 miles), if you break these restrictions, you face severe penalties.

Used Car Financing Tip #3: Private or Dealer Financing?

While leasing is a good way to save money on a month to month basis, choosing to buy the car is often the better economical choice. However, even if you do decide to buy instead of lease, you still have one more decision to make: Deciding between dealer-offered financing and private lender financing options. The advantages of dealer offered financing are convenience and eligibility. This is because the dealer never wants financing to stand in their way of making a sale, so they will pull out all the stops to help you qualify for a loan. However, if you are looking to save money, choosing to go to a bank or credit union is probably the better choice. Banks and lenders often offer lower interest rates when compared to dealership financing, meaning that you will pay less over the lifetime of the loan. Keep in mind, that when you are deciding on your financing options, not every decision is right for everyone. For this reason, it is important to carefully weigh the pros and cons of each decision point, and decide which option best fits your current needs.

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