Picking out a new car can be difficult, but figuring out your financing options can be even more perplexing. Whether it’s your first time or fourth time buying a car, you’re going to have questions that we at Coronet Mitsubishi are happy to answer. Before you sign on the dotted line, here are some questions we’ve frequently been asked—and want you to know the answers.
What is an MSRP?
The MSRP is the price which a product’s manufacturer suggests the retailer sell the item for. In this case, a car’s manufacturer recommends that the dealership sell the car at a certain “sticker price.” While that price is recommended, it’s sometimes negotiable.
What is APR?
APR stands for “annual percentage rate of charge,” which describes the annual interest rate on a loan. It’s typically shown as a percentage that reflects the cost of the loan for its duration.
What is co-signing?
If your credit score is low or credit history is weak, you might still be able to obtain a loan by entering into the agreement with someone you know. This other person—often a family member or friend of yours—agrees to repay the loan if you fail to do so.
What is the difference between dealership and direct financing?
If you obtain a loan directly through a bank or financial institution, you’re involved in direct lending. However, if you enter into a financing agreement with the dealership, who then sells the contract to a financial institution, you’re part of an indirect or dealership loan. We recommend investigating both options to see which way gets you the best rate.
Does my credit score matter when obtaining financing?
Your credit score figures prominently in determining what kind of financing you can achieve. Though a good score makes it easy, a poor score does not immediately bar you from obtaining a loan.
How can I improve my credit rating?
You want to use about 30% of your available credit. Sometimes you can improve your score by expanding your credit. If your score is low, contact your creditors. Arrange for payment plans. Start paying all of your bills on time.
Should I buy used or new?
This is entirely up to you! Take into account your unique financial situation. Some people love the experience of a brand-new vehicle. They enjoy the fact that new vehicles rarely require repairs. Others can’t resist the economical benefits of buying used.
What is gap insurance?
This is insurance that covers the difference between the depreciated value of the vehicle and the amount owed. This discrepancy can develop in the first few years of a loan because a vehicle depreciates quickly during that time.
What is MSRP?
The Manufacturer’s Suggested Retail Price; this is the dollar amount the manufacturer suggests the car be sold for. The car’s price won’t always match the MSRP. Dealerships may hold their own specials or manufacturers may offer incentives in an effort to sell more cars.
What is Direct Lending?
The opposite of dealership lending, this is a loan taken out from a bank, credit union, or other lender. There’s no third party; the buyer and lender have direct communication following the purchase.
What is Dealership Lending?
The opposite of direct lending, dealership lending is also known as indirect lending. This method of financing draws up a contract between the buyer and dealership. The dealership will then sell the contract to another financial institution.
What is a Cosigner?
A cosigner is someone that signs a contract with the buyer, forging a legal obligation to pay the bill should the buyer fail to do so. Having a cosigner can often make it easier to get a car loan from a financial institution.