But before you settle on your dream car you have to find out what fits into your budget, and that means you have to figure out your financing.

It’s important to have your budget figured out before you commit to a car, otherwise you could end up with bills you can’t pay, or even lose the car you spent so long shopping for. This can happen because car loans are a type of secured loan. That means the car itself is the collateral for the loan. If you get in over your head and aren’t able to make payments on the loan, then the lender can repossess the car.

Figuring out your car financing options can be daunting, but with the right information you’ll be in the best position to make the smartest decision for your you. Our helpful guide will walk you through some of the most common financing options.

Is It Better to Finance a Car Through a Bank or Dealership?

The best place to finance a used car in NJ is going to depend on each person. If you’re worried about your credit then some options are going to be better than you than others. It’ll also depend upon what financial institutions you already belong to and your relationship with them. But there are more than two options to think about.

Banks

Banks are the most common option for car loans, but in the past few years they’ve been more reluctant to issue them because of economic uncertainty.

Credit Unions

Credit unions are another financing option. They’re nonprofit organizations, so they can offer lower interest rates than banks can. Unfortunately, they don’t always lend to people that aren’t members.

Online Lenders

Service websites like LendingTree or MyAutoLoan compile online loan offers from a range of institutions so that you can compare the best lending option for you.

Home Equity Loan

This loan could be a good financing option for you if you’re a homeowner. It isn’t as common as some of the other financing options, but this would allow you to use the equity from your home at a similar rate to what you’d get for an auto loan while being tax deductible.

What is Dealership Financing?

Dealership financing is a type of loan between a dealership and its customer. This loan is then often sold to a third-party financial institution. However, there are several different types of dealer financing.

Captive Finance Companies

Captive finance companies are the second most common financing option. Major manufacturers like Ford and Toyota have financing through their own company. These are captive finance companies, any subsidiary that finances purchases form the parent company. This means you finance straight from the brand, so they can make special deals like 0% interest or rebates. Unfortunately, they deals are usually only available to those with stellar credit scores.

Dealer-Arranged Financing

Dealership-arranged financing is when a dealership allows a bank they have a relationship with to provide financing to their customers, rather than the dealership offering the loan themselves. They act as a middle man between the institution and the bank. Dealerships can offer deals other financing options can’t, like reducing the list price so you don’t have to borrow as much.

Buy Here Pay Here

A small amount of customers may choose to use loans from Buy Here Pay Here dealerships. This practice is also known as in-house financing because the dealership itself remains the lender, rather than a separate lending institution like dealer-arranged financing. This is often done for borrowers that could have trouble getting a loan elsewhere. Dealerships are able to do this because the car itself serves as collateral to secure the loan.

Now that you know some of the most common financing options for buying a used car you have all the information you need to take the next step towards getting your used car.

Shopping for a used car? Then shop at Royal Motors Inc. for the best deals in NJ! We accept all trades regardless of condition and with bank financing starting at 2.89% we’re able to accommodate most credit needs. Speak to our friendly team of experts at 856-346-2121 or visit our location in Voorhees, NJ.