How to Finance a Used Car – Getting it Right

The fact you’re reading this article probably means you want help on how to finance a used car purchase.

It would be nice to say that if you contact the “Free Money On Demand” company, they’ll immediately deliver a truckload of cash to your front door and charge you nothing for it. If only!

In reality you’re probably going to have to think a little about things and avoid rushing in – at least if you’re looking for the best deals possible.

Try to clarify your own financial position.

Before you get any loan from anyone, you will need to be able to explain your overall financial position. They’ll most likely need to know how much you’re earning, the nature of that income and what your monthly outgoings are.

They need this to try and understand how much you can realistically afford to pay back each month and from this they’ll know the maximum amount they could lend. You won’t help your case if to start with potential lenders see that you’re unclear about things as basic as how much you earn each month or how much you’re already paying out on things such as mortgage or rent. It won’t create a picture that you’re in control of your finances!

Deposits = confidence & lower cost.

Many lenders like to see that you are contributing some money to the purchase. The percentages may vary but asking for a big loan when you’ve only got 14.75 pounds to offer as a deposit won’t inspire confidence. There may be some zero deposit deals available but it’s worth remembering that these mean you’re borrowing more and therefore the repayments will be higher. In some cases ‘zero deposit’ interest rates may also be higher.

Keeping your feet on the ground.

Any professional and scrupulous lender will want to see that the value of the asset (car) bears some relationship to the reality of what you are trying to borrow and proposing to pay for it. Many lenders will have a comprehensive knowledge of vehicle values and while you think that 20-year-old rust-bucket is in fact a future antique and a snip at the price – they may not share your optimism.

Thinking about the options for financing.

If you have verifiable regular income and assuming you do not have a catastrophic credit history, you will probably find that there are many lenders around such as banks, building societies, finance companies etc. It may pay to avoid the temptation to take the first one offered just because it means you’ll get the car faster. You may get a much better lower-cost loan by shopping around or getting someone to shop around for you.

Recognising the complexities of car finance deals.

If you’re not completely comfortable with the complexities of interest rates, repayment periods and service charges, or if you have a history of credit problems, then you may want to think about using a specialist car finance service.

That’s because it’s not always easy to tell at a glance what the best offer is for your particular situation. There are specialist car finance websites that do offer a broad-spectrum knowledge of how to finance a used car and you may learn a lot from reading through their services and advice. More importantly, you could also save yourself a lot of money!

Financing a used car will for many be easy. How to finance a used car in the most cost-effective fashion may be more demanding and need a little preparation combined with expert help to find the right deal. Good luck:

Finance a Used Car With A Lien

To finance a used car with a lien is not that difficult and is a pretty common occurrence now days. This is because most people have a lien on their car when they go to sell it. Gone are the days that someone pays off their car and keeps it until it dies.

Let’s begin by explaining what a lien is…

A lien is a put on a piece of property, in this case a vehicle as assurance that the borrower will pay the debt in full. It is a form of security for the lender.

When anyone finances a car, new or used the bank places a lien on the vehicle until it is paid in full. This gives the lender the right to the title also. Once it is paid in full the lender releases the lien and the borrower owns the car outright.

Now you will become the holder of the title.

Buying a used car from someone who owns the car outright and is the holder of the title is definitely an easier choice but there are times when it simply isn’t possible.

So, if you have fallen in love with a vehicle that you simply must have but it still has a lien on it, let’s take a look at how to finance a used car with a lien.

If you’re buying from a private seller…

Never hand over cash to the private seller that still has a lien on his or her vehicle they are trying to sell. This is because you have no guarantee that the person will pay off the loan releasing the lien.

If they don’t pay off the lien…

You are out double; you have lost your money and you cannot legally own the car.

Begin by speaking with the person who is selling the car. Discuss which lending institution holds the lien on the car. Ask how much he owes on the balance of his loan.

You will want to know this information.

If the seller owes more that what the vehicle is worth you will want to know how the seller is going to pay the balance off.

Usually the seller is more than willing to share this information in order to sell the car more quickly.

Once the lien is paid off the lender will issue a separate release of lien on the car.

Once you have purchased the car you will want to get a bill of sale from the seller. This is not a step you can afford to miss because you will need this bill of sale for the next step.

Now take the lien release, bill of sale, proof of insurance as well as the title to the DMV (Department of Motor Vehicles) and then they will issue the title in your name with your bank as the lien holder. At this same time, the DMV will collect any taxes due for the vehicle.

So be sure to take your checkbook.

An easier way…

Purchasing a used vehicle through a reputable dealership with an auto consultant/auto broker may be the easiest route possible. This is because the dealer would have paid of any prior liens when they bought the vehicle from the previous owner.

This guarantees you that the car has no liens against it.

The Bottom Line

The easiest way to finance a used car with a lien is to use a trustworthy dealer with an auto broker/auto consultant working for you

Saving You Money on Financing A Used Car

Without having the cash to purchase your used car, you may want to finance one with great rates and terms. Purchasing a new car may be a stretch for some people today. Buying a used car is a smart way to go if you have limited income.

When looking for a used car you will need to take some things into consideration. For example, the older the car is you may encounter some problems with constant repairs that can be very costly.

When looking to finance a used car, figure out what type of vehicle you need, such as a car, SUV,truck or a mini van. Ask yourself how long you will be keeping the car and what will you be using it for. Before signing any loan agreement make sure you understand all the fine print, such as interest rate, early pay-off penalties, etc.

After you decide what type of vehicle you want and you know how long you plan to keep it, you can start looking at the options you have for financing. Don’t just look at one lender do some comparison shopping.

To save the most money, paying for your car outright would be ideal. But lets come down to reality, most people cannot pay cash for a car. While looking for financing, consider putting a down payment on your car. This way you won’t have to finance so much for your car. If you finance your car and the taxes that go along with it will end up costing you more money in interest.

The less you borrow, the less you pay in the end. Shorter loan terms are a good way to save you extra interest charges. Loan terms 72-84 are not a good option to follow. It does not benefit you, just the lender. Longer term loans can cause you trouble as your car depreciates faster than you are paying it off. You will owe more for the car than it is worth.

Do not sign any documents that state you will have a pre-payment penalty if you pay your car off early. It may cost you a lot of money. The reason is that majority of loans are paid off before they mature, and its the lender that makes the profit.

There are options out there when it comes time for you to finance your vehicle. Do some shopping around and find the loan that fits your personal needs.

By the way, do you want to learn more about how I teach my clients to save money on their vehicles?