New Car Financing

You have numerous financing options for your new car purchase. Manufacturers offer incentives for buyers to purchase a new vehicle, whether in the form of rebates or low interest rate offers. Leasing is also a possibility. However, your credit standing may affect your financing and interest rate options.

Special Rates or Rebates

Special rates and rebate offers are advertised online at the manufacturer's website. Usually, low interest rates are offered in lieu of rebates. To obtain the special rate, you must use the manufacturer's bank for financing. Rebates may be offered without regard to how you pay for the car but may require you to use the manufacturer's bank. If so, you might obtain a higher-than-average interest rate. To determine which offer saves you more money, use an auto loan calculator to review total loan payback cost.

Leasing

Leasing offers a lower-priced option to financing. Instead of owning the vehicle as you would if pursuing a traditional finance, you can drive a new vehicle for a specified term and mileage and return it to the leasing bank at the end of the contract term, usually around three years. Leasing requires you only to pay for depreciation, not the entire vehicle cost. Mileage restrictions apply; you can often choose from 10,000 to 18,000 miles per year. Leasing offers are also advertised on manufacturer websites.

Other Financing Options

You can pursue a car loan at any loan provider you'd like. If you were declined for a loan through a manufacturer's bank for leasing or low-rate financing, you can reapply using a co-signer. Subprime lenders also exist locally or online. Subprime lenders offer loans to risky borrowers with poor credit. Many new-car dealers also use subprime lenders to obtain loans, so work with a dealer if you have credit issues. If the manufacturer doesn't require you to use its lender for rebates, you can still use your discounts when applying to an outside lender.

Considerations

Taxes and fees increase the cost of your new-car purchase. Depending on the area in which you live, you can pay thousands of dollars in tax fees. Adding an extra $1,000 to your loan amount increases your monthly payment by about $20 per month without a down payment. Find out your taxes and state fees to budget appropriately. Once you purchase your vehicle, the dealer will offer an extended warranty and other aftermarket items, which also increases your car payment. Be sure to stick your budget throughout the sales and loan process.