The 411 On Leasing And Financing

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Buying a car is a necessary task for many people. Unfortunately, most people do not have the cash available to purchase a vehicle without financing. Thankfully, there are many options available when it comes time to buy a car. Of course, knowing all of the fine print is important if you are considering a lease or finance. Using this guide, you will learn a few essential factors about leasing and financing your new vehicle.

Lease

A common misconception about leasing is that you are only renting the vehicle. However, this is not entirely true because you will have the option to purchase the vehicle at the end of your lease agreement.

In most cases, a lease allows you to pay the depreciation value of the car instead of the actual purchase price. This ensures you get more car for your money. A lease also allows you to get a new car at the end of your agreement, which may be 3 or 5 years depending on your actual agreement.

There are negatives associated with a lease, though. If you drive a lot of miles each year, a lease is most likely not the right decision for you.

Most lease deals allow you to pay lower monthly payments as long as you are willing to sign onto a mileage restriction. A restriction of 10,000 to 15,000 miles is common for lease agreements. If you drive more than the lease deal's mileage restriction, you will need to pay a fee at the end of your agreement. This fee can be a few cents for every mile you go over.

Finance

Because of the mileage restrictions and the inability of paying for the actual car's purchase, securing a car loan through traditional financing may be a better option for you. The application process can be a bit overwhelming, so knowing a few tips can help you get the best rate and deal possible.

First and foremost, you should check your credit before heading to a car dealership. The higher your credit score, the lower your interest rate will be. A lower rate will mean your payment is lower, which will allow you to save money while paying your loan off faster.

On average, a credit score of 740 or higher is considered excellent. This score will allow you to receive the best deal possible when financing a car. If your score is lower, here are a few tips to improve your score before applying for auto financing:

• Pay Down Debt – Pay off or pay down balances on credit cards and loans.
• Pay Off Collections – If you have any collections or charge-offs on your credit report, contact the companies and negotiate payoffs. It may take some time for these payoffs to show on your credit report, but it will be a worthwhile investment in time.
• Request Increases – Contact your credit card companies and ask for increases on your credit limits. These increases will improve your overall debt-to-credit ratio, which will give your credit score a good boost.

Once your credit score is at or above the excellent mark, you can then start negotiating with a dealership. It is also helpful to visit the websites of vehicle manufacturers to determine who is offering the best financing promotions and incentives.

Combining a low-interest rate with cash back rebates and incentives can make a vehicle more appealing than another that is not offering these promotions.

When it comes time to buy a car, you do not have to be overwhelmed with your options. By understanding these key traits of a lease or finance, you will be able to determine which option is right for the purchase of your car. Reach out to lenders like New Horizons Credit Union to learn more.

26 March 2018