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As your rusted-out jalopy squeals down the street while you're on your way to work, you might think to yourself that it's about time purchase a new car. Or even a car that's just new to you. If this is your first car purchase, it's important to understand your financing options so you won't become a deer in headlights in front of the car dealers. Below is an overview of the key aspects of financing a vehicle. Examine your cash flow What is your financial situation? You may want to evaluate your income and spending to be sure you have enough to cover your living expenses with the addition of a large debt before you begin thinking about the color of your new dream car. It's important to know that the total amount you will be obligated to pay will mainly depend on these factors: annual percentage rate, the length of the credit contract, and the price you negotiate for the vehicle. Additional considerations Only take on a significant additional debt when you are spending less than you make. The debt should not infringe on any amount you have committed to saving for emergencies or other priorities. Also, saving up for your down payment or trading in a vehicle can reduce your financing costs. Depending on the vehicle, a trade-in may take care of the down payment completely. Your financing options: Direct Lending As the name implies, direct lending means you would receive a loan directly from a finance company, credit union, or bank. After you agree to pay the financed amount over a set period of time, you would use the loan to pay for the vehicle. Financing through a lender can give you the chance to shop around and compare several lenders' terms at once to find the best one for you. You will also learn your rate and other terms of your credit in advance by financing before you purchase your vehicle. Dealership Financing Dealership financing, or choosing to finance through car dealers, is the other most common type of funding. In this situation, the customer enters into a contract with the dealer that states that they agree to pay the initial amount plus a finance charge over a set period of time. Car dealers may sell the contract to a bank or other finance company that will service the account and collect your payments. They may also hold onto the contract themselves. Financing with car dealers can provide the comfort of convenience since the vehicles and financing options are located in one place and may have extended hours more suited to your schedule. The dealership may also be able to offer you a range of financing choices because of their relationship with banks and finance companies, or special programs sponsored by the vehicle manufacturer. These programs may include incentive programs or low rates; they may also be specific to a certain brand of vehicle, or have stipulations such as a shorter contract length or a larger down payment. Offers will likely vary based on your credit score. For Harrisburg car dealers, drivers trust the team at Hoffman Ford. Learn more by visiting http://hoffmanford.com.
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