620 × 412
There's no question that purchasing a new or pre-owned car is an expensive endeavor. According to Edmunds, the average price of a new car today is about $37,000. The vast majority of customers don't have that kind of cash upfront, so car buyers generally have two options: a direct loan or vehicle financing.

Car Financing Options

Direct Lending

When you opt for a direct lending option, you obtain a loan from a bank or credit union and agree to pay, over a period of time, the amount they lend you plus any interest. The loan is then used to pay the dealership directly for the vehicle.

Dealership Financing

Dealership financing is when you obtain financing through the dealership you're purchasing the car from instead of a bank. It works in a similar way: You agree to pay the amount financed plus interest over a fixed period of time.

How Does Financing a Car Work?

If you go with the dealership financing option, what typically happens is the dealership sells your financing contract to a bank, credit union or other finance company, called an assignee. The assignee is responsible for servicing the account and collecting your payments.

Financing Terms and Process

Typically, when you want to apply for financing at the dealership, you fill out a credit application and the dealership runs a credit check to examine your credit history, which outlines important information including past and current credit accounts. These might include credit cards, auto loans, mortgages and student loans. Generally, the account balance, payment history and age is provided for each credit account listed.

Based on the information contained in your credit report, the assignee determines an appropriate interest rate for the loan. Then, any down payment amount or trade-in vehicle you are contributing is deducted from the total loan amount. From there, monthly payments, including interest, can be calculated based on how long the loan is for.

Vehicle loans are typically either four years (48 months), five years (60 months) or six years (72 months). Longer duration loans may have a lower monthly payment, but you may end up paying more interest over the life of the loan. Shorter-term loans might have higher monthly payments, but you generally pay less interest as a trade-off.

Benefits of Dealership Financing

Financing your new vehicle through the dealership you're purchasing it from comes with plenty of benefits, including:

- Convenience: You can generally do everything you need to all in one place, from selecting the car to signing a contract and obtaining financing. Dealerships also usually have convenient hours, including evenings and weekends.
- Multiple financing options: Many dealerships maintain relationships with several banks and financial institutions, so you can often choose from a range of financing choices.
- Special programs or promotions: Low interest rate specials or Ford-sponsored deals are often available, although they may be limited to certain vehicles or have special requirements, such as a larger down payment, shorter contract length or high credit score.


If you've got your eye on a brand-new Ford vehicle, stop by our Ohio Ford dealership in Parma, Ohio. We offer financing for new and pre-owned Ford, so you can find one that fits your driving needs and budget.

Categories: Finance