How Does Car Financing Work?

If you’re looking for a new car in North Wales, you may know that you’ll need to “finance” your purchase if you can’t pay the entire cost upfront. But just what does it mean to finance a car? Financing a car simply means that you are taking out a loan to cover the cost of your new vehicle. Then, you’ll pay off the loan over the course of a few years. After the final payment, the car belongs to you! Read below for more about how car finance works, and check out our car-buying guide for our answers to common car-buying topics like:

• How to apply for auto financing
• Deciding whether to buy or lease
• Choosing the best place to get a car loan

How Car Finance Works

First, establish your budget and choose a vehicle that’s comfortably within your comfort zone. Your next step is to decide whether to finance with a traditional lender (such as a bank or credit union) or in-house with a Lansdale-area dealership. How car finance works will differ slightly depending on whether you work with a lender or your dealership.

If you choose to work with a lender, you will need to contact them and ask about the process for submitting an application. So, what does it mean to finance a car in-house? If you work directly with a dealership like North Penn Mazda, our financing department can guide you through the process of gathering your credit history and other financial information. Then, we’ll submit your application to multiple lenders on your behalf.

No matter which path you choose, lenders will consider the following factors as they review your application:

• Your credit score
• The age of the vehicle
• Principal loan amount on your new vehicle
• The length of the loan term
• Your debt-to-income ratio

Finalize the Terms of Your Auto Loan

You can expect to be offered higher interest rates if your credit score isn’t where you’d like it to be, but you may have some room to negotiate. Any offers you receive aren’t necessarily set in stone!

How does car financing work with bad or no credit? You may be surprised to learn that some lenders are willing to negotiate if you can provide proof of a stable income that will allow you to pay off your loan on time. And in general, dealerships tend to be more flexible about accepting lower credit scores than traditional lenders.

Learn How Car Finance Works Here in Colmar!

Our team of auto finance professionals is happy to assist if you have further questions about what it means to finance a car. We want to put you behind the wheel of the new Mazda you’ve been dreaming about — at a price you can feel great about. Get in touch with us today or visit our finance center near Chalfont to get started!