If you need a car and you can’t afford it, you may turn to financial institutions for help. You have three car financing options here: the bank, the credit union or the manufacturer’s financing. In this article, I am going to detail these three options paying attention to their advantages and disadvantages.
Bank vs. Manufacturer’s Financing
Some car manufacturers offer their own car financing. Examples are Ford and General Motors. This car financing is often low-interest rate and comes with some features. They may offer a cash-back or other finance deals. This year Chevrolet offered 7.49%, BMW – 5.59%, Nissan – 4%, Hyundai – 3.99%
However, these programs apply only to certain vehicles and may require a large deposit (down payment) and shorter duration contract. You must also have a strong credit rating in order to take advantage of the offer. In fact, if your score is high, you may end up getting a very good deal. According to Experian Automotive, some borrowers secured an interest rate of 1% in 2014 with the average credit score of 748.
However, some car manufacturers allow their dealers to charge a higher rate in order to “markup”. So, eventually, the buyer may end up paying a high-interest rate.
While the manufacturer’s car financing may be an attractive option, it is not accessible for everyone. If you don’t have a large down payment or if you want to have a longer duration contract, you better choose between a bank or a credit union.