How Does Car Financing Work?
Financing a car simply means you take out a loan to purchase a car, then pay back the loan in monthly installments. The basics are easy enough, but we often hear from car buyers wondering how car finance works in detail. Depending on your budget and preferences, different financing options may fit your needs best.
How does financing a car work if you want to trade in your car, and what are the benefits of leasing vs. financing? Read our guide to answer those questions and more!
What Does it Mean to Finance a Car?
How car financing works for Costa Mesa car-buyers is part circumstance, part preference. The average loan term for both new and used cars is 72 months, although you can opt for a shorter or a longer term.
How interest is calculated may change depending on factors like your loan term and credit score: the lower your credit score, the better interest rates lenders will offer. Lenders will consider multiple factors when they offer you a financing deal, including:
- Credit Score
- Debt-to-Income Ratio
- Repayment Term / Length of Loan
- Age of the Vehicle
- Loan Amount
How to Apply for Financing
How does financing a car work compared to leasing? When your financing term ends, the loan is paid off — and you own your Acura vehicle! When a lease term ends, you’ll return your vehicle to the dealership and decide which all-new model to lease next. Contact our finance center to explore leasing and financing benefits in detail!
Before you apply for financing, make sure you calculate exactly how much you can afford to pay each month. Here are a few points to keep in mind as you search for a lender:
- Low or no credit? You’re more likely to be approved for a loan if you finance directly with your dealership.
- Trade-in and trade up. Value your trade with us, and take the amount of your current car’s value off the price of your next.
- Draw up an accurate budget. Remember to include fuel, insurance, and maintenance costs.
- Determine your monthly payment maximum. A higher monthly payment will save you money on interest, but be careful not to set it too high. Late payments can damage your credit.
- Submit all applications within 2 weeks. Submit all of your financing applications within the same two week span, so any damage to your credit score won’t show up when prospective lenders run a credit check.
Lease or Finance an Acura Vehicle in Anaheim!
Ready to dive into your auto financing options? Contact the Weir Canyon Acura finance center for expert guidance! Our goal is to get you an amazing deal on an Acura vehicle you love — and we’ll work with you one-on-one to make sure that happens. Explore our special offers on pre-owned and used Acura vehicles for drivers in the Tustin and Montclair areas, and then get started with a financing application today!
