Car Financing & Loans  

Most consumers need some type of financing to buy a car now. If you decide to buy a car, you usually have two financing options. You can get a loan from the bank or through the dealership.  

With direct financing, you get a loan from a bank and pay the dealership for the car in full. Then, you pay off the bank loan. Direct financing from a bank will usually allow you to shop around more to get the best interest rate and terms.

With dealer financing, you pay off the car over time with monthly payments. Dealership financing is more convenient, but does not allow you to shop around as much for the best terms. If you use dealer financing, try to negotiate the finance charges, which can be very high. Dealers often make a good profit on the financing and may have room to negotiate. The advertised low interest rates are generally for buyers with excellent credit scores. Your interest rate may be higher depending on your credit score. 

Also, do not negotiate based on a monthly payment, although the dealer will try to get you to do this. The dealer can usually manipulate the numbers to meet your desired monthly payment. But you may be paying more in the end. Always be sure you understand the total amount you will be paying for the car, including interest. The more months you are paying for the car, the more you will pay in the end. Also, watch out for balloon payments at the end of the loan that dealers use to lower the monthly payments. 

Be sure to read the financing agreement and try to understand all the terms before signing. Request to take a copy home before signing, so you have time to read and understand it. 

Legal Editors: David Kassell, Esq. and Mark Grossman, Esq., May 2018