Car Financing FAQ: Are monthly payments necessary?

With vehicle prices averaging over $29,000 for a brand new car, you would most likely need a lease or vehicle finance to buy a car. Before you start shopping for the best financing deals, it is advisable to obtain more information in regards to vehicle financing, such as monthly car payment rates, cash back, and more.

There are two types of financing, which are the direct lending and the dealership financing. Direct lending is a loan that you acquire from a credit union, finance company, or bank. With this type of financing, you will agree to pay the amount borrowed and the finance charged over a certain period of time.

The dealership financing is almost the same as the above, but with a vital dissimilarity. You will deal with the dealership and you agree to let the dealership retain the contract. This contract is normally sold to an assignee, such as the credit union, finance company, or bank. One of these institutions will service the account and collect the monthly car payment rates. Monthly auto financing payments are necessary, particularly if you cannot afford to buy a car by paying a huge lump sum.

Dealership financing offers a number of advantages, which include the following:

- Multiple financing relationship.  Dealerships normally have multiple relationships with a wide selection of financial institutions. This means that they can offer you a variety of financing alternatives.

- Special Programs.  Dealerships may offer low-rate, manufacturer-sponsored programs to you. This can help you save a lot on your monthly car payment rates.

- Convenience.  Dealerships offer you financing and vehicles in one place.

A large number of dealerships have an F&I (Finance & Insurance) Department, which offers one-stop shopping for financing or leasing. To initiate the process, you will need to complete the credit application form, which includes your names, date of birth, Social Security number, sources of income, and many more. In addition, you are required to supply a copy of your financial credit report.

It would be a great idea to confirm what your credit report is like to ensure that all your information is complete, up-to-date, and accurate before you apply for a car loan. In doing so, you can easily find out if you can afford the monthly car payment rates.