How Does Car Financing Work?

Whether you’re in the market for your first vehicle or you’ve leased in the past but now want to finance, you’ll probably wonder, how does car financing work? Lexington and Shelby drivers can’t go wrong with a guide like Spitzer Kia Mansfield! Our finance team is here for you at every step of your journey, from explaining how car finance works to getting the best rates available to you. Read the guide below to get started!

What Does It Mean to Finance a Car?

Before we dive into how car finance works, we should answer a preliminary question: What does it mean to finance a car? When you finance a car, you work with a lender, such as a bank or credit union, who loans you the money for the car. You are then responsible for paying that loan back to the lender in monthly payments, plus interest and any other fees, within a certain period, called the loan term. Once you’ve paid off the loan, you’re the sole owner of the vehicle!

How Car Finance Works

Now that you know what it means to finance a car, it’s time to learn how the process works and how to get started. After you find a new or used vehicle you want to purchase, the first step is applying for a loan. 

As we mentioned, you can go through a bank or credit union, but you can also work directly with a dealership like ours! If you wish to do so, you can apply for pre-approval online. Regardless of whether you get help from the dealership or apply on your own, lenders will look at the following factors:

• Credit Score
• Loan Amount
• Length of Loan
• Debt-to-Income Ratio
• Age of the Vehicle

If your credit score is low or your credit history is weak, you may need to get a cosigner for your loan. Typically, this would be someone close to you, like a family member or longtime friend. 

Choose a Lender

You may receive offers from multiple lenders. And, if you have bad credit, you may consider in-house financing from dealerships that offer it. Take the time to compare all your options and choose the one that is right for you and your budget. Consider how much of a down payment you can afford, how much your monthly payments will be, and how much other expenses (insurance, registration, fuel, and maintenance) will cost to ensure you can afford the loan you choose.

Finalize the Loan Terms

At some dealerships, you might need to negotiate the price of your vehicle before signing off on the loan. But at Spitzer Kia Mansfield, the Panda Price eliminates the need to negotiate with our best offer up front! With the Panda Price, we take the stress out of getting the best price on a vehicle. 

Once you’re satisfied with the price, it’s time to finalize your loan terms. There will be paperwork to sign, and then comes the fun part — taking delivery of your new ride and bringing it home to Ashland! 

Get the Support You Need at Spitzer Kia Mansfield

If you have any additional questions about how car finance works, our team is here for you. We want our customers to feel empowered to make the best decisions for their situation, so we ensure transparency at every step of the financing process. Contact us or stop by our dealership in Mansfield to work with us!