How Does Auto Financing Work?

Obtain a Financing Source

• Bank or Credit Union – A bank can give you a competitive rate on an auto loan, but it’s not always convenient. You’ll need to go back and forth between them and the dealership, and they’re rarely open past normal business hours.
• Online Financing – While online financing sources are becoming more common, it can be tough to know if you’re dealing with a reputable institution. On top of that, you’re not guaranteed a personal, one-on-one customer service experience.
• In Dealership Financing – A dealership like MINI of Santa Monica can evaluate your individual needs and build a custom financing package around them. In addition, the convenience of working with a dealership means you can purchase the car and a financing package in one place.

Understand Interest Rates & Charges

When you finance a vehicle at a dealership, you’re paying the dealership the value of the vehicle over a series of payments. The interest is the amount you’re paying on top of the value of the car, and it’s expressed as a percentage rate. APR is a common term you might come across, and it includes your interest charges and any other loan fees.

Choose a Loan Term

When you finance your next vehicle, you’ll be offered loans of different lengths, so “what loan term should I choose?” is a question we hear a lot. For example, you might see a loan with a 4.9% interest rate offered at 48 months, 60 months, or 72 months. Keep in mind that if you choose the lengthiest loan, you’ll pay more over time, since you’ll be paying the same interest rate each month. Most experts recommend figuring out the maximum amount you can spend each month and choose the loan that matches that figure.