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How to pay for your vehicle

There are many financing options available

Who hasn’t picked up the thick Sunday paper, looked at the brightly colored automobile ads and thought, “Wow, you mean I can buy a new _____ (Civic, Mustang, etc) for $199 a month? I can afford that!”

After looking at the fine print, however, it is revealed that the unbelievable price is for that portion of the population who hasn’t had any hiccups on their credit report. The price may also be a lease that requires several thousand dollars to be put down on the car.

What is the best way to buy a car (new or used)? Is leasing the best option, or should you buy it? If you do purchase it, should you finance it through the dealer or somewhere else?

Buying a car
When buying a car, you can secure a loan through the dealer or from another lending institution. Loans are typically issued for periods of 36-72 months. A longer loan will mean lower monthly payments but more interest paid in the end.

Going through a dealer for your loan is convenient and can lead to special programs like rebates and dealer incentives. It can also lead to a higher interest rate, however. Make sure to check your credit report before applying for a loan ( or This will alert you to any potential issues.

Leasing a car
A lease normally means lower monthly payments than securing a loan and buying a car. People who like to change cars on a regular basis often prefer this option.

Car leases, though, often come with pitfalls like mileage limits (12,000-15,000 miles per year). Going over those limits can cost 10 to 15 cents per mile! Leases can also require higher down payments and can come with penalties for excessive wear and tear on the vehicle. Make sure to try to secure a lease with a higher mileage limit (15,000 to 18,000 annual miles). This will raise the monthly payment, but will save you money in the long run.

Paying cash for the car
When you pursue this option, you are not really reaching under your mattress for your wad of cash you’ve been saving since the sixth grade. This simply means that you are going to secure your own loan and present the dealer with a check.

There are several good outlets for securing auto loans. You can do these online and get pre-approved so you will know exactly how much car you can afford before you begin shopping.