Financing a vehicle is a serious commitment. Learn about how the process works before signing on the dotted line.
Before You Visit the Dealership
- Determine how much you can afford
- Check third-party buying guides and websites to determine the price range of the vehicle you want to purchase
- Get a copy of your credit report so you know what potential lenders will see. It's also a good opportunity to correct any errors or inaccurate information. You can get a copy of your credit report by contacting one of the three major credit bureaus: Equifax Credit Information Services, Experian or TransUnion Corporation
Applying for Financing at the Dealership
Most dealerships have a Finance and Insurance (F&I) Department, which provides one-stop shopping for financing. The F&I Department will ask you to complete a credit application, which will ask for the following information:
- Your name
- Social Security number
- Date of birth
- Current and previous addresses and length of residence
- Current and previous employers and length of employment
- Occupation
- Sources of income
- Totally gross monthly income
- Financial information on existing credit accounts
Once you've completed the credit application, the dealership will obtain a copy of your credit report, which contains information about current and past credit obligations, your payment record and data from public records (for example, a bankruptcy filing obtained from court documents).
Approval Process
Typically, dealers sell your contract to an assignee, such as a bank, finance company or credit union. The dealership submits your credit application to one or more of these potential assignees to determine their willingness to purchase your contract from the dealer.
These finance companies or other potential assignees will usually evaluate your credit application using automated techniques such as credit scoring, where a variety of factors, like your credit history, length of employment, income and expenses may be weighted and scored.
Each finance company or other potential assignee decides whether it is willing to buy the contract and notifies the dealership of its decision.
Special Offers
Make sure you ask your dealer if the vehicle you are interested in has any special financing offers or rebates. Generally, these discounted rates are not negotiable, may be limited by your credit history and are available only for certain models, makes or model-year vehicles.
APR
Your credit history, current finance rates, competition, market conditions and special offers are among the factors that influence your annual percentage rate (APR).
When there are no special financing offers available, you can negotiate the APR and the terms for payment with the dealership, just as you negotiate the price of the vehicle. This negotiation can occur before or after the dealership accepts and processes your credit application.
Purchase Financing Checklist
Here's a list of questions to review when securing your vehicle financing:
- What is my annual percentage rate APR?
- Can I receive a lower APR if I make payments using electronic funds transfers?
- What is the exact price I am paying for the vehicle?
- What is the specific amount of each monthly payment?
- Is my down payment at least 10% of my total vehicle cost?
- What is the total cost, in dollars, my purchase on credit, including financing costs and my down payment?
- Do I incur any penalties if I pay off early?
- What is the total number of payments?
