What You Need To Know About Auto Financing

Posted Monday, Aug 22, 2022

When choosing a form of auto loan to finance their next vehicle purchase, automobile purchasers have many options. Although certain auto loans are more typical than others, it's still useful to be aware of them before you start looking for your next car.


The key distinctions between various auto loan types relate to whether the collateral is a vehicle, how interest is calculated, and the source of funding. Additionally, there are unique vehicle loan kinds for certain situations.

Auto Financing Dealer - Decatur, GA

What Is Car Leasing?

When you lease a car, you have the privilege of driving it for a predetermined number of months and miles. You have the option to "walk away" from the lease after returning the car and paying any associated fees and penalties. If you have a purchase option, which is a common clause in lease agreements, you may purchase the car for the additional agreed-upon sum. Most of the time, if you break the lease early, you'll have to pay an early termination fee, which might be expensive.

Since you are paying for the anticipated depreciation of the car throughout the lease time and a rent charge, taxes, and fees, the monthly payments on a lease are often cheaper than monthly finance payments on an identical vehicle. However, unless the lease agreement allows you to purchase the car and you agree to the purchase price and terms, you must return the vehicle at the conclusion of the lease.

Most conventional leases have a mileage cap depending on how many miles you may go annually, usually 15,000 or less. You may negotiate a greater mileage cap, but doing so often results in a larger monthly payment since the car depreciates more quickly throughout the lease term. If you drive more miles than the lease agreement allows, you'll probably have to pay more when you return the car.

When you lease anything, you are in charge of any extra wear and tear, damages, and missing equipment. You must also maintain insurance that complies with the requirements of the leasing business and service the vehicle in accordance with the manufacturer's recommendations.

Figure Out Your Budget

Determine how much you want to pay for your total car payment each month, then analyze your options for the finest auto loans. You'll be in a better position to negotiate the conditions of your transaction if you do some homework before visiting dealerships and are aware of your possibilities. Keep in mind that many auto shops will likely make deals that are best for them, not the consumer.

Although auto dealers are frequently ready to offer in-house financing for your vehicle purchase, it could be a good idea to consult with other lenders first. Compare prices. Prepare a list of inquiries, and ask prospective lenders about the overall cost, loan term, interest rate, and potential penalties.

The average loan rate for automobile purchasers with great credit is 2.47%, according to Experian statistics from the fourth quarter of 2021. According to the credit agency, strong credit may get you an average interest rate of 3.51%, even with a less-than-perfect credit score. According to experts, what constitutes a decent auto loan rate will change by vehicle and applicant, so it is crucial to keep that factor in mind when searching for auto financing

Improve Your Credit Score

Learn about your personal credit history as the initial step in this procedure. One of the main elements affecting your vehicle loan rate is your credit score; the better your score, the cheaper your rate. You may check your credit score using various internet resources; your bank could even send you a free update each month. You may also examine your credit reports from each credit agency, such as Equifax or Experian, if you want a more thorough understanding of the state of your credit.

Although each lender has a different minimum credit score requirement, you'll normally need a score in the mid-600s to be eligible and a score above 700 for the best prices. If your credit score needs improvement, take some time to raise it before submitting an application for a loan by settling current debt, making prompt credit card payments, and refraining from asking for any more credit. If a lender does decide to approve you for a car loan despite your bad credit, you could otherwise have to pay exorbitant interest rates.

Co-Signer Option

In order to make up for any shortcomings in your credit history, a creditor could need that you have a co-signer on the loan contract. You share equal liability for the contract as a co-signer. Both the credit histories of the borrower and the co-signer will show the account payment history. Therefore, if you are requested to co-sign for someone, proceed with care.

However, before agreeing to co-sign, be sure you understand the terms of the contract and can afford to take on the payments since co-signers are legally required to pay back the contract.

Determine Your Options w/ a Reliable Auto Dealer

If you are looking for a dealer that offers secure financing on certified pre-owned vehicles, you can get pre-qualified with Olympic Auto Sales in Decatur, Georgia, to determine your options. You'll save time visiting our dealership and be able to finish your car purchase from the convenience of your home if you pre-qualify. Without affecting your credit score, you may explore the automobiles for which you've been given approval in a matter of minutes and customize your financing terms and payment options according to your needs and requirements.

Contact Olympic Auto Sales today at 404-299-6566 to find the best auto financing option that suits your needs.