Thinking about buying a new car, are you? Or perhaps you’re considering buying used instead. There are definitely some things to think about here, including whether to finance or lease your vehicle. It can be a bit complicated, can’t it? We can help with that… Today, let’s answer the fundamental questions of ‘What is auto financing’ and ‘How does auto financing work?’
Auto Financing
Often, the term ‘auto financing’ is often used as an umbrella term for both financing (purchasing with monthly payments) and leasing a vehicle; the two are very different, though! What is auto financing, specifically? If you choose to finance a vehicle, you’re essentially choosing to buy it by making regular payments toward the cost. Eventually, after several months or a couple years, you’ll own the vehicle, fully! This gives you the many benefits to vehicle ownership, including the ability to fully customize your ride.
How Does Auto Financing Through a Bank Work?
When you finance a vehicle through your bank or credit union, you start with getting a loan directly through them. The agreement is that you’ll make monthly payments toward that loan, paying it off with interest. A bank is a great place to get general advice about your finances before you make any commitments.
The advantages:
- You can shop around easily, asking these lenders about their credit terms prior to buying
- You’ll get your credit terms in advance, so you’ll know your rate and other terms as you shop
- Your bank knows your personal finances especially well, so they can offer a unique perspective on your options
How Does Auto Financing Through a Lender Work?
So how does auto financing work through a lender? When you finance a vehicle through a finance company or car dealership, you’ll be dealing with the same people you bought your vehicle from, all in one-stop!
The advantages:
- Convenience is an advantage because they shop around for you, and you’re financing and finding a vehicle through the same people
- You’ll have plenty of financing options through a finance company, especially considering the many relationships they have with lending institutions
- Special finance programs and low-rate offers are available through lenders–offers you won’t get through the bank
Leasing
Leasing is very different from financing. When you lease, you’re not buying a vehicle; you’re agreeing to use one for a set number of months or miles. At lease end, you can return the vehicle, buy it for a previously agreed-upon price, or lease/finance a different vehicle. The benefit to leasing is that you aren’t tied to a particular vehicle; you can switch to another, newer one as you please.
What is Auto Leasing Through a Lender Like?
Advantages:
- You can expect lower monthly payments than with financing, making for a considerably lower cost of ‘ownership’
- Lenders have many different term and mileage plans available for you to select from, and you can often extend the terms as you need to
- Should you ever want to purchase your leased vehicle, you certainly can do so, and at a lower cost than the sticker price
- You’ll have found and be leasing your vehicle with the same company
- Lenders have special offers regularly
Building Your Credit
Used Cars Canada or UCC can help you determine your credit rating which is used to negotiate financing plans with lending institutions. Even if your credit it poor, lenders can work with you. In fact, regardless of your financial situation, many lenders are able to secure a plan for you. And you know what? Financing a vehicle is actually one of the absolute best ways to build up or rebuild your credit into something to be proud of!
As you make your regular payments toward your car loan on time, the lending institution takes notice. What you’re actually doing here is building trust and credibility with these companies. Banks will be more likely to work with you in the future, which will open up many more possibilities for you, including options for mortgages!
Your credit rating increases, your options open up, and eventually, you’ll own your vehicle. Your transportation needs are met, and now the future seems that much brighter.
Getting Approved
Getting pre-approval for financing or leasing is simple and straightforward: just complete a quick approval form, and then one of our associate lenders will invite you in for a consultation. They’ll discuss your transportation and finance goals, and then secure the best possible plan for you and your family’s needs. They’ll also happily introduce you to one of our wonderful, quality used vehicles on their lot. And soon after, you’re good to go.
If you have any other questions or concerns, however, don’t hesitate to contact us at Used Cars Canada (UCC)–one of our Finance Experts would be delighted to speak with you.