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What You Need To Know Before Financing a Sports Car
When financing a sports car, the subject of most importance is the interest rate. Many people go into a long term financing contract taking only the monthly payments into consideration. In order to make sure you get the best interest rate possible, there are things that you need to know. These include: the interest rate market place, lender options, financing offers, the car you are interested in buying, the length of your loan, your credit rating, and your personal monetary situation. While it is beyond the scope of this article to discuss these in detail make sure you take a look at how each of these pertains to you.
When it comes to who will be lending you the money for your sports car purchase, it can come from three sources: banks, credit unions, and automakers. In each of these situations, the loan is prepared by the dealership who acts as an intermediary in the deal. If the dealership can finance your vehicle, they will often throw in special offers, such as low interest rates and grace periods. Every time a dealer acts as intermediary in a new loan, they receive a kickback of some kind. Therefore, if you get the loan directly from the automaker, you may get some of that kickback yourself.
The interest rate you receive on your car loan will probably be lower if you buy a new car than if you buy a used one. While this should not play too much of a role in your decision to buy a new or used sports car, it is important. Currently, the average interest rate for a new car is 6.72 percent and the average interest rate for a used car is 7.1 percent, according to bankrate.com. When you buy new, you also stand the chance of getting 0 percent financing if it is available.
You should also pay attention to the term length of the loan being offered. The average term length on an auto loan is 64 months, 5.3 years. This is so long that it usually requires the buyer to pay much more than the vehicle is actually worth in the long run. It takes a very long time for the buyer of the vehicle to get any equity in the car this way as well, especially with depreciation constantly bringing down its value. For this reason, do what you can to get a shorter term limit. It may mean getting a cheaper car in the end, but even so it may be worth it.
The final thing to keep in mind when leasing that new sports car is your credit rating. Even if you have a great credit score, it can be difficult to get an auto loan if you have had no secured loans in the past. Unsecured credit, such as credit cards, can get your foot in the door though if you have a very good rating. A higher credit rating can also get you a lower interest rate.
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