Car dealers are business people who have a certified franchise with one or more car manufacturers. They do not work for the manufacturer; the manufacturer does not possess the dealership.
Dealers purchase cars from the manufacturer, usually with huge "floor-plan" loans from a bank or finance company. Interest is charged by the bank on these loans. Dealers have to sell the cars off to pay these loans with related interest, as well as cover other operating expense of organizing a business.
The dealers always receive cash, after he sells or lease a car, whether it's straight from the customer, or from a finance company or bank who has loaned a customer the money.
Dealers don't finance car loans and leases Dealers are not bankers. They do not directly finance cars they sell or lease. They work with some financing companies or banks to provide the customers with finance. The dealers arrange financing as a service on customers? behalf. If the customers choose he can also arrange his own financing.
Dealers pre-approve car financing A dealer may do a brief introductory check of a customer's credit account using any of the main credit reporting agencies. This is not done for loan or lease sanction, but only to decide if the customer has such serious credit problems that it would not be favorable to carry on with the deal.
The deal is NOT done after your car finance contract is signed Many customers wrongly presume that when the dealer says he has done a credit check and lets the customer sign papers that the deal is done and the whole thing is officially wrapped up. That's Not correct. The deal is not completed until financing has been set and the dealer has been paid for his car.
What you sign and what it means When a customer finances a car with a loan, he or she signs papers that basically reads as: " I agree to purchase this car, using finances that will be loaned to me by a finance company or bank (if I am approved), and that the dealer will endeavor to position this loan for me, and, if the funds are not agreed by a finance company or bank, the deal is void unless the dealer can find a different finance company that will approve me. If the loan is agreed, the finance company or bank pays the loan that was funded, directly to the dealers. The finance company or bank will then work straight with me to assemble monthly payments to repay that loan. In this way the dealer will have then been paid in full for his car and will no longer be involved in the lease or loan."
If your lease or loan is not approved The finance company or bank can find problems in the customer's credit history/score or debt-to-income statistics that makes them flag the application as great risk. The dealer is then asked to notify the customer that the application was not accepted, or that a co-signer is required in order to re-submit the application for approval. Finance companies and banks work through the dealer; they do not work with the customer straight until the payment book arrives after consent.
What choices do you have? First, the customer should always be acquainted with their own credit history previous to approaching the dealer's showroom. Second, the customer can inquire the dealer if he works with other banks or finance companies that might be willing to grant the loan or lease. Third, the customer can at all times shop for his own car financing and get pre-approved.
As car financing is readily available these days, more and more people are enjoying the luxury of owning a car. There are several factors that pave the way to accomplish a car finance, such as, comparing the various car financing rates, getting pre- approval of car financing application and most importantly, the credit score of the applicant which plays the major role in getting a car finance.
Actually, the credit score of the applicant reflects the credit worthiness of the person and as such, it is imperative that the credit score be good. The credit score also has a say in deciding the interest rates and down payment requirements. Generally, a credit score that is above six hundred is considered to be good and if not, it is better to improve the credit scores to get qualified for car financing.
The next step in the process is to compare the various rates like the interest rates, the fees structure and the down payment rates which differ from one lender to another. Comparison helps to find the best and most suitable deal that is available in front of the borrower. It is necessary and important to get a pre approval for car financing. This would help in approaching the dealer and try to negotiate on getting the discounts and rebates, as if the borrower has some cash in hand.
In this age of computers and internet, it is just impossible to ignore the utility of internet which offers a great deal of information on car financing. So, the availability of information on internet can be made use of .There are some genuine websites that provide invaluable information on different car finance lenders who specifically deal with car financing alone.
Through internet, it is also possible to compare the various rates simultaneously which would undoubtedly be unbiased and the source of information is trustworthy. But another source of information on car financing is through friends, relatives and colleagues who have had first hand experience on car financing and would be in a position to offer valuable information on the lender to be approached and the one who should be avoided. Such personal information would be vital in helping to shop around for car finance without much ado.
Car financing is a highly competitive business and the dealers vie with one another to offer loans to people having good credit history. Hence, it is not an uphill task to get car finance when a person has a good credit rating and acquiring car finance and a new car is within the reach of anyone.
Both Niraj Patel & Adam Boulton are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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