With prices averaging more than $20,000 for a new vehicle and $9,500 for a four-year-old vehicle, most consumers need financing or leasing to acquire a vehicle. In some cases, buyers use "direct lending:" they obtain a loan directly from a finance company, bank or credit union.
In direct lending, a buyer agrees to pay the amount financed, plus an agreed-upon finance charge, over a period of time. Once a buyer and a vehicle dealership enter into a contract and the buyer agrees to a vehicle price, the buyer uses the loan proceeds from the direct lender to pay the dealership for the vehicle.
Consumers also may arrange for a vehicle loan over the Internet. The most common type of vehicle financing, is "dealership financing.", but the smart car buyer knows it's better to shop for financing before you shop for the car, and the internet is fast becoming the "big dog" in auto financing.
In a dealership financing arrangement, a buyer and a dealership enter into a contract where the buyer agrees to pay the amount financed, plus an agreed-upon finance charge, over a period of time. The dealership may retain the contract, but usually sells it to an assignee (such as a bank, finance company or credit union), which services the account and collects the payments. For a vehicle buyer, internet financing offers:
1. Convenience - Consumers can shop for financing from many different sources (often from one website), from the comfort and privacy of their own home.
2. Multiple financing options - A potential auto buyer now has the power to "shop the nation" for auto financing and get approval within minutes, without ever leaving their den or living room.
3. Special programs - From time to time, online loan entities may offer incentive discounts to buyers who have procured a loan with them previously, or are already doing business with a partnered company.
4. Low overhead - Some financial companies are now "internet only" which allows them to have very low overhead. In turn they tend to pass the savings on to their customers in the form of lower interest rates, and to their employees in the form of better wages. The later usually translates into better customer service.
For the vehicle buyer, dealership financing offers:
1. Convenience - Dealers offer buyers vehicles and financing in one place.
2. Multiple financing relationships - The dealership's relationships with a variety of banks and finance companies mean they can offer buyers a range of financing options.
3. Special programs - From time to time, dealerships may offer manufacturer-sponsored, low-rate programs to buyers.
One downside of waiting to finance through a dealership is that the customer may get "car fever", and step into a financing situation that may be less than optimal, just so they can "drive the car home today". Automobile salesmen are quite aware of this potential, and will sometimes help the customer's emotions get the best of them.
Do your homework - The complete article can be found at http://www.aloanandlovingit.com/vehicle-finance.html
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About The Author
John Martin is the owner of aloanandlovingit.com, a personal finance website featuring up to date, informative content. Visit http://www.aloanandlovingit.com and signup for the now famous, seven-day financial awareness e-course.
(c) 2005 eyebye media (John Martin)
