How To Weigh Your Auto Finance Options

To a few lucky souls, paying cash to buy a new car is an easy thing to do.  However, for most of us, leasing or buying the vehicle through financing may be the only options.  If you go for the auto financing option, the choices would either be the bank, auto dealership, credit union, online financial company, or even a family member. Here are a number of helpful tips on how to carefully weigh your auto financing options.    
Bank vs Dealership vs Credit Union:  Which One Offers The Best Rates
The most common auto financing options today include the bank, credit union, auto dealership, online financing firm, or a family member. Here's a short overview of the pros and cons of each choice. 

- The Auto dealership:  Auto dealerships offers fast service, and competitive financing rates.  The downside however is that a car dealership will most likely insert a lot of add-ons that you're not familiar with, and they're more likely to front-load loan payments too (more interest is added at the start of the loan than towards the end).
- The Credit Union or Bank: Banks and credit unions are known to offer personalized service,  competitive rates, free insurance and simple interest loans.  The downsides of going to the bank or coop is that they're not as convenient as dropping by an auto dealership, as they're not open at night or on weekends.
- The Online Credit Company: Online auto  finance providers are known for offering fast, easy and competitive financing rates.  They do not offer personalized service though, and some online financing firms have also been found to be scams.
- Home Equity Loans:  By opting for a home equity loan scheme, you can deduct some of the auto loan interest from your taxes, as you'll be using the home's value as leverage.  The downsides of getting a car via the home equity option is that this may  tie-up your car to your home (think of the recent mortgage industry crisis).
- Getting a Loan From a Family Member: Your mom and dad, or your siblings can help you get a car quickly. Getting a loan from a family member offers a lot of perks. The perks include personalized service, flexibility of repayments and competitive rates. The downside though is what if you fail to pay the loan - could this wreck your friendship or family ties? 

In choosing any financing option, remember that actual rates may vary from the figures advertised on TV, print or the Internet.  One factor that can severely affect the financing rate is the applicant's credit rating.  Your credit score and history will certainly offer lenders a lot of insight regarding your spending habits, and it will provide them a clear idea of what the possible risks are, should they choose to give you the loan. If your credit report looks like a dirty sheet of unpaid bills and loans, then the financing firm will be more likely to either reject your application, or raise the interest charges.


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