If you’re thinking about buying a new car, you should know your options — and we aren’t just talking about cloth vs. leather interior. There are more ways than ever to finance a new car purchase, and with a little research, you’ll find the financing route that gets you the most car for the least green.
- Dealer financing: Financing a car through the dealership is probably the most convenient source for a loan, but if you aren’t careful, it 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. We recommend shopping around before signing the papers.
- Banks and credit unions: Banks and credit unions are another traditional source of funding, and they typically offer lower rates than dealer financing. The biggest perk is that you can have one of these loans lined up before you even enter the dealership. This will put you in the driver’s seat during finance negotiation.
- Online loan marketplace: Online loan marketplaces (hey, that’s us) have a network of qualified lenders that compete for your business. As the consumer, all you have to do is provide some basic information and you’ll get a list of personalized loan offers in minutes. This is one of the quickest ways to connect with reliable lenders and compare competitive deals. Get a head start on your auto loan qualification here.
- Home equity loan: If you own a home, you can borrow against your home equity to finance your car purchase. In some situations, this option can carry a lower interest rate than a traditional car loan, and as an added bonus, the interest may be tax deductible.
- Leasing: Leases — essentially long-term rental agreements — can make financial sense for auto enthusiasts who enjoy getting 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.
- Saving: Simply saving money is perhaps the oldest and most basic financing option, but the benefits are often overlooked. Although the vast majority of Americans finance their car purchases, this method is great for experienced car buyers who have completed the car payments for their current vehicle. Consider making monthly deposits (in the amount of your old loan payments) into a high yield savings account. Here, your money will earn interest until you’re ready to buy your next vehicle — or at least make a significant down payment.
- Family financing: The next best thing to having money yourself? Having a family member with money. If possible, ask a relative to co-sign for a loan or ask to borrow the money outright. Just be sure to put everything in writing so that both you and Uncle Moneybags are clear about what you’re getting into. Family feud averted.