Dealer Financing

Advantages of Dealer Financing

There are a number of advantages associated with dealer financing. Let's look at a few:

• Benefit from financing deals. One benefit of taking advantage of dealer financing is being able to benefit from a low initial interest rate. For instance, the manufacturer may offer 0% financing for the first year. Of course, you need to read the fine print with these deals, but if all looks good, you're in business!
• You're not bound to this agreement. Actually this is true of any financing agreement that results in you buying a car. While you are bound to the agreement in the sense that you are expected to pay your car notes every month, you can always refinance if you become unhappy with the deal you struck with the auto dealer.

• Auto dealers aren't looking for good deals for you. One reason that you might avoid dealer financing is because the dealer's agenda is to have you pay as much as possible for a vehicle, not get you a good deal. So often times, you find yourself led to a vehicle that may be too expensive for you because the dealer wants to work out a "deal" that will either have you pay for the car for 6 or 7 years, or your interest rate could go up after a year or two.
• Hidden fees might apply. Another disadvantage of working with an auto dealer for financing is that they are in cahoots with their own finance companies to make money. This means, not only might you be told you qualify for the lowest of a bunch of really high rates, but the dealer may throw in some additional hidden fees in your finance contract. It's important to review everything you sign thoroughly to make sure this doesn't happen.

• Lower monthly payments. One major way that this type of financing can benefit you is through lower monthly payments. In fact the whole point of zero-percent financing is being able to take advantage of paying less on your monthly car payments . So of course you expect to get this deal when you see this type of interest advertised.
• Pay only the principal. Every month your car payments is directly paying off the value of the car that you had purchased it for. So in the end you are not paying any interest on the car.

• High monthly payments. One reason that you might steer clear of these deals is because the trade-off might be a higher monthly payment. For instance, some dealers decide to insist you pay the car off in a shorter time frame as a trade for paying more interest. So while you may not have interest to worry about, you may have to pay $100 to $200 more per month to get it paid off in time.
• The rate may adjust. Some manufacturers offer zero-percent financing for a specific period of time, after which you're responsible for a higher rate. This can keep your monthly payment low for a while; but after the rate goes up, how will you pay your the rest of your loan off?