The Top FAQs About Financing Your Vehicle

September 30th, 2016 by

A person is shown with financing paperwork at a Buy Here Pay Here dealership in Columbus.

It’s time for a new vehicle, and you’re worried about how you’re going to be able to afford it. Whether you’ve been working on your credit and it’s vastly improved since the last time you purchased a car, or it still needs a little work, McCluskey Automotive can help. We’re the leading Buy Here, Pay Here dealership in Columbus, and we make it easy to find a solution when it comes to financing your vehicle. You may have some questions flitting through your mind about what the process entails and whether or not choosing to finance your car is the right move for you. That’s why we’ve compiled some of the most frequently asked questions about this matter, so we can help you make the right decision.

What Happens When You Finance a Car?

A vehicle is a big investment, and oftentimes, drivers don’t have enough money set aside to buy a car right then and there from the dealership’s lot. If this is you, you’re not alone, which is why dealerships like McCluskey Automotive offer plenty of ways to finance your vehicle, so you’re able to travel in a safe and reliable car. Financing means taking out a loan that requires you to pay back over time, accruing interest, with the rate being determined based on your credit score. You’ll agree to payment terms with a lender, which include the length of the loan, interest rate, monthly payment amount, and your lender’s details. Your monthly payment will be put toward the principal balance, as well as the accrued interest for the month, and once your loan is paid in full, your vehicle will officially belong to you.

What Are the Advantages of Financing a Vehicle?

The biggest advantage of choosing to finance your vehicle is being able to bring a new car home with you without using every single penny you have saved up in the process. It saves you time, as you’ll be able to start the process before you have much of the money set aside (except a bit to put down on the car to help reduce your monthly payments), and it’ll help you add more dependability to your travels. It also helps you build credit. Once credit bureaus notice that you’re making regular, on-time payments on a loan, your credit score will improve. Financing is typically an easy process, one that allows you to drive a car off the lot with little money spent out of your own pocket on the day of purchase.

A couple is shown holding a car key in front of a white vehicle.

What Are the Disadvantages of Financing a Vehicle?

Of course, financing a vehicle isn’t for everyone, and there are a few limitations that go along with the process. For one, you’ll be responsible for a monthly payment, which will need to fit into your budget. The great thing about partnering with McCluskey Automotive is that our finance team crafts payment plans that work with your unique financial needs, so you’re never stressed about how you’re going to afford your car payment. As with any type of loan, you’ll also be paying interest, which will be added to the original purchase price of the vehicle, and the longer you pay on the vehicle, the more interest will accrue. Although this is something you’ll need to think about, generally, the benefits far outweigh the limitations when it comes to choosing to finance a vehicle.

Does Financing a Car Hurt Your Credit?

If you decide to move forward with the financing process, you’ll experience a hard inquiry to your credit score, which typically has a small effect on the score itself. Many borrowers only see a slight decrease in their score by a couple of points with this process, which in the grand scheme of things, isn’t a big cause for concern. It’s important to remember that your credit depends on a few key factors, which have the potential to raise or lower your overall score. From revolving utilization and debt to income ratios to open accounts and payment history, there are many ways for you to ensure that your credit score continues to rise. When you take a single hard inquiry to your credit, most drivers don’t even notice much of a difference, so this shouldn’t be a cause of stress in this situation.

What Are the Vehicle Finance Options?

Financing a car means that you will work with a lender, who will lend you the necessary funds, and you, in turn, will pay these funds back with interest. There are a few different types of lenders that are typically used in the industry, one of them being direct lenders. These are banks, financial institutions, and credit unions that you’ll be working with for the duration of your loan. There’s also dealership financing, where you will work with the dealership directly as the lender. There are numerous advantages of working with a dealership that provides Buy Here, Pay Here financing, especially when you’re working on improving your credit.

A couple is shown talking to a salesperson at a Buy Here Pay Here dealership in Columbus.

What Are the Advantages of Buy Here, Pay Here Financing?

If your credit score currently needs a bit of work, lending institutions may deem you too much of a risk and thus, won’t offer you a loan, or worse, will offer you a loan, but with a terribly high interest rate. When you work with a dealership that offers Buy Here, Pay Here financing, like McCluskey Automotive, you’re able to qualify for a loan, paying it back to the dealership. They take a chance on you so that you’re able to rebuild your credit and get back on track with your finances. This is the biggest advantage for customers with bad credit, as they’re able to buy a car that meets their travel requirements and improve their credit in the process.

You’re also able to keep the process simple by keeping everything in the same place—your payments and a team you can trust, plus a selection of vehicles available when you’re ready to trade up for a better model. Once you prove to credit bureaus that you’re able to make regular payments, in turn paying your vehicle off in full, you’ll be on your way to qualifying for better loan terms in the future.

Is Financing a Vehicle Worth It?

Regardless of which type of vehicle is on your mind and the state of your financial situation, financing a vehicle makes it easy to bring a car home that you can be proud of and one that delivers a safe and trusted ride. Whether you choose to work with a direct lender or a Buy Here, Pay Here option, the end result is the same—a new car in your driveway that won’t let you down. At McCluskey Automotive, we strive to provide our customers with multiple ways to buy a car because we know how important it is to travel in a vehicle that offers value, reliability, and security to your journey.

So, Is Financing a Vehicle Worth It for You?

Well, that depends on you! If you don’t want to wait until you’ve saved up all of the money needed to buy a car, financing it may be a great option for you. If you want to work on improving your credit score, choosing Buy Here, Pay, Here financing may be the right move. On the other hand, if you don’t want to worry about a monthly payment, you may want to buy your car outright. It depends on you, and no matter what process you choose, McCluskey Automotive can help.