How Does Financing a Car Work?

If you’re like many Hudson car shoppers, you might be wondering, “How does financing a car work?” Financing a car means you take out a loan from a bank or dealership, and pay back the cost of your car gradually. When you’ve paid back the vehicle’s market value plus any interest at the end of your financing deal, you own the vehicle. What does it mean to finance a car versus lease it? When you finance, you’re investing in a car you’ll drive for years to come. By comparison, you’ll only keep a leased vehicle for the length of your lease term, typically 24 to 48 months. Read the guide below to find out how car finance works from the finance center at Bernard's Chrysler Dodge Jeep Ram!

What is Financing a Car?

The majority of Amery drivers apply for a loan through a bank or their local New Richmond-area dealership. Applying to multiple lenders gives you a chance to compare their offers and choose the best deal, although you’ll want to be mindful of your credit score as well. When lenders consider you for a loan, they’ll analyze the following factors:

  • Credit Score
  • Debt-to-Income Ratio
  • Age of the Vehicle
  • Loan Amount
  • Repayment Term / Length of Loan

While bad or no credit makes it more difficult to secure a loan, it doesn’t mean you can’t finance. Your dealership is more likely to extend a loan than a bank, so it’s smart to focus on in-house financing.

Find the Right Financing Plan

Before you apply for financing, make a budget to figure out how much you can afford to pay each month. As you start the application process, keep these points in mind:

  • If you have poor credit, making a bigger down payment can help convince the lender that they can trust you to make timely payments on your loan.
  • Value your trade-in with Bernard's Chrysler Dodge Jeep Ram and subtract its value from the cost of your new car.
  • Remember to include gas, insurance, and maintenance costs when calculating your car expenses.
  • Determine the largest amount you can afford to pay per month without stress. Amery drivers who pay the highest monthly amounts can enjoy significant savings, but if your monthly payment is too high, an unexpected setback can cause you to fall behind on your car payments.
  • Use our payment calculator to make an accurate budget.
  • If you decide to apply for financing from multiple lenders, be sure to submit all of your applications within a 2-week period to avoid penalties to your credit score showing up before you finish applying.
  • Bring income documentation and negotiate with your lender. You may be able to secure better interest rates if you can prove you have the income to make your payments.

Discover Your New Richmond Car Financing Options!

Ready to take the next step toward owning your next car? Get in touch with the financing experts at Bernard's Chrysler Dodge Jeep Ram for more info about financing a new or used car in our inventory. We’re happy to answer any questions about buying or leasing a car in Minneapolis. Our team can also help you discover what is a good interest rate on a car loan and more!

Bernard's Chrysler Dodge Jeep Ram 45.1350627, -92.5321338.