Understanding the Difference between Financing and Leasing
Leasing and financing are two terms that you will hear being used as you look for your next vehicle. Leasing and financing both involve making monthly payments, but they are two different things. When you finance a vehicle, you are given an auto loan to purchase the vehicle, which will officially be yours once you finish paying the loan. However, when you lease a vehicle, you will be renting the vehicle and will need to return the vehicle once the leasing contract has reached the end of its term. You are limited to the things that you can do with a leased vehicle and the number of miles that you can drive with the vehicle as well.
A Few Important Terms
There are a few important terms that you will be presented with and will need to understand when you are looking for an auto loan to finance your first vehicle with. A key part of an auto loan is known as the interest, which is a percentage of the loan that you will pay back on top of the amount that you have borrowed. The interest on a loan is where the profit lies for the lender of your auto loan. An interest rate essentially describes the amount of interest that you will pay on your auto loan.
When you finance your first vehicle, you may be advised to pay an initial amount of money for the vehicle, which is known as your down payment. A down payment is not always required to get an auto loan, but it can help in many cases. A down payment will not only reduce the amount of money that you need to borrow to purchase your vehicle, but it will also reduce the amount of money that you will need to pay back monthly and in interest.
As you look for an auto loan, aside from seeing different interest rates, you will also see different loan terms. The term of a loan is the amount of time that you have to pay back the loan. Loans with longer terms usually cost more in the long run, as you will be paying more money to the lender in interest.
Determine Your Budget
Develop a budget before you finance your first vehicle so that you have an idea of the amount of money that you can afford to spend and pay back every month to a lender. As you create a budget for your first vehicle, factor in the cost of insurance for the vehicle and the cost of fuel as well. Leave additional room in your budget for any maintenance costs and repairs that you may need to make to your vehicle while you use it.
Maximize Your Credit Score
Before you finance your first vehicle, you should try to raise your credit score as high as possible. Having a higher credit score will allow you to receive better loan conditions and may make the difference between you getting approved for specific auto loans. There are several things that you can do to maximize your credit score, such as paying down any existing debt that you may have.
Shop Around
You should shop around for different loans so that you can receive the best conditions and terms for your unique situation. Do not apply for too many different auto loans, however, as each application will result in a hard inquiry on your credit report, which can decrease your credit score. Try to shop around for different auto loans within a fourteen-day window, as credit reporting agencies typically count multiple similar inquiries within a two-week timeframe as a single inquiry, thus
impacting your credit score only once.
Purchasing your first vehicle can seem like a challenging process, but the process is much easier once you understand what to look for. Visit us at Prostrollo Motor Sales if you would like to learn more about financing your first vehicle or if you would like to finance a vehicle through us. Feel free to also browse through the diverse selection of vehicles that we have in our dealership's inventory so that you can find
