If you’re thinking about buying a new car, you should know you have lots of options – and we don’t just mean leather or cloth seats and power or manual door locks. There are more ways than ever to finance a new car purchase, if you’re willing to look a little beyond the obvious. Here are seven of them:
1. Dealer financing
This is probably the most convenient source for a loan, but dealer financing can also be the most expensive. Typically, the dealership acts as a middleman between you and the lender, pocketing the mark-up it adds to the lender’s take.
2. Banks and credit unions
Banks and credit unions are another traditional source of funding, but they typically offer lower rates than dealer financing. And you can have one of these loans lined up before you even enter the dealership.
3. Online loan marketplace
Online loan marketplaces (such as LendingTree.com) have allowed lenders to compete reliably for years as part their network of loan makers. LendingTree quickly connects consumers to auto lenders who compete for your business.
4. Home equity loan
If you own a home, borrowing against your home equity can be a smart way to finance your car purchase. It will likely carry a lower interest rate than a traditional car loan, because it’s secured by your home. And the interest may be tax deductible.
5. Leasing
Leases – essentially long-term rental agreements – can make financial sense for those who like to get a new car every few years. Your monthly payment will likely be slightly lower than if you had taken out a loan, but remember that at the end of the leasing period, you will have nothing to show for those monthly rental payments.
6. Saving
A fairly novel idea, given that 70 percent of all Americans finance their car purchases. Once you’ve paid off the loan on the car you’re currently driving, consider making monthly deposits – in the amount of your old loan payments -- into a high yield savings account. Your money will earn interest, and when you’re ready for a new car, you could at least have a big down payment.
7. Family financing
The next best thing to having money yourself: having family members with money. Perhaps your rich relative will co-sign for a loan or loan you the money directly. Just be sure to put everything in writing so that both you and Uncle Moneybags are clear about what you’re getting into.
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