Are you looking to buy your first car? Congratulations! Buying a car for the first time is exciting but it’s also a lively experience. Many first-time car buyers use financing to make the purchase. The team at Paul West Used Cars wants to help with information on how financing and buy here, pay here work.
What Is Financing?
Financing is the term used to describe how many people buy a used car from the many Gainesville car dealers such as Paul West Used Cars. Essentially, financing is a contract between the buyer and the car dealership that outlines how much will be paid for the vehicle over a period of time. The time period is usually split into months and the length can vary from 36 months (3 years) to 84 months (7 years).
Since all financing is a loan, there is an interest rate associated with the auto loan amount, and the rate varies depending on several factors related to the buyer.
Your credit score usually plays the largest role in determining the interest rate. It’s used by lenders to evaluate on-time payment history, age of credit history, number of open credit lines, and if the score has any derogatory marks.
This ratio shows the balance between a buyer’s current outstanding debt and their income. A debt-to-income ratio is the amount of outstanding debt owed to your gross monthly income. Gross monthly income is the total amount of income before taxes and other deductions are taken out.
Total Amount Borrowed & Down Payment
The amount you’re asking to borrow and a down payment usually go hand-in-hand to a lender. The larger the borrowed amount, the more a lender would like reassurance the amount will be reliably paid off. A down payment, even a small amount, acts as this reassurance.
Age Of The Vehicle
Most of the time, financing for a used car has a higher interest rate because the vehicle’s value has already started to depreciate. But, as we mentioned earlier, there are other factors more important in determining the interest rate than the age of used cars Gainesville, FL, residents have to choose from.
Length Of The Loan
Shorter loan lengths mean the total amount financed will have to be repaid sooner. It’s important to consider your overall budget when deciding on the length of the loan. A shorter loan length generally has a higher monthly payment which can affect how much money you have left to pay other expenses.
How To Budget For Your Used Car
Every budget begins with adding up your monthly expenses (such as groceries, and rent or mortgage payment) and subtracting the total from your monthly net income. The amount left over is generally the amount you could spend on a car payment. But, remember the cost of a vehicle doesn’t end after you drive it home from one of the used car dealerships. Any budget should include:
- Car insurance payments which may be monthly or semi-annual;
- Annual licensing and registration for your local municipality;
- Estimated fuel costs; and
- Regular maintenance such as oil changes and tune-ups.
Depending on where you live, you may also need to pay for monthly parking. There are many online calculators available to help you calculate a budget.
Can You Afford A Down Payment?
It’s widely suggested to have a 10 percent down payment when buying used cars. But depending on the purchase price, 10 percent of the purchase price could end up being more than you can pay out-of-pocket.
Keep in mind any down payment amount will reduce the total amount you’ll need to finance. The amount of interest paid over the life of the loan is also less with a down payment. The more you can put down on a vehicle, the more options you’ll have. But it’s possible to buy a used car without a down payment. Having a cosigner for the loan is one option but generally isn’t a requirement when you buy a used car from a buy here, pay here car dealer.
How Buy Here, Pay Here Financing Works
Traditional used car dealerships work in conjunction with banks and other financial institutions to arrange car loans for buyers. But when you work with a buy here, pay here dealer such as Paul West Used Cars, all financing is handled through the dealership. Without an outside lender to go through, there is no minimum credit score needed to qualify for financing. You’ll sit down with the finance manager and discuss available financing options. We strive to make the car buying experience as enjoyable as possible whether you’re buying your first car or fourth.
Buy Here Pay Here
At Paul West Used Cars, we report every on-time monthly payment to Equifax, one of the three major credit bureaus. We care about our customers and want to help them in any way we can. By reporting on-time monthly payments, this shows a reliable payment history and therefore helps build and improve your credit score. Our customers aren’t subject to refinancing if they choose to refinance their vehicle through a personal bank or credit union once their credit score reaches a qualifying level. When you buy a car from Paul West Used Cars, you’ll find a team who truly cares about you. Visit us today!