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Before you begin any car financing process, it is essential to first understand financing and to determine if it is right for you. Whether you consider yourself an expert or know nothing at all about financing a car, Enterprise can help prepare you for what to expect and how to get the financing for your vehicle purchase.
In order to give you a better understanding of how a loan term impacts the total payment for the life of the contract, we’ve compiled a sample comparison between a three-year and a five-year credit transaction. Check out our Determining How Much You Can Afford section for tips on deciding what kind of car financing is best for you.
Have you seen or heard some language and terms you don’t understand? Our Financing Terms section explains key definitions that are important for you to know. And be sure to read through our Things to Consider section so that you’re fully prepared to discuss financing before you arrive at the dealership. This section also explains what you can expect once you are there. Our What Your Credit Score Means section explains the importance of credit scores when financing a car and how you can obtain a copy for yourself.
Financing Terms for You to Know
- Negotiated Price of the Vehicle – this is the purchase price of the vehicle agreed upon by the buyer and the dealer.
- Down Payment – an initial amount paid to reduce the amount financed.
- Vehicle Service Contract – this is optional protection on specified mechanical and electrical components of the vehicle available for purchase to supplement any warranty coverage provided with the new or used vehicle.
- Guaranteed Auto Protection – optional protection that pays the difference between the amount you owe on your vehicle and the amount you receive from your insurance company if the vehicle is stolen or destroyed before you have satisfied your credit obligation.
- Amount Financed – the dollar amount of the credit that is provided to you.
- Annual Percentage Rate (APR) – the cost of credit expressed as a percentage.
- Finance Charge – the total dollar amount you pay to use credit for financing.
- Fixed Rate Financing – the APR remains the same over the life of the contract.
- Variable Rate Financing – the APR varies and the amount you must pay changes over the life of the contract.
- Monthly Payment Amount – the dollar amount due each month to repay the credit agreement.
- Assignee – the bank, finance company or credit union that purchases the contract from the dealer.
Determining How Much You Can Afford
One of the first steps in a vehicle purchase is determining how much you can afford to spend – paying in full, car financing or leasing. If you choose to finance a car, it’s important to calculate your entire monthly budget and living expenses, and then decide how much you can afford to spend on a car payment. You can utilize the Enterprise Payment Calculator to estimate these monthly payments and budget. Next, determine if you want a short - or long-term finance contract, which may mean smaller monthly payments but ultimately result in more money paid over time. In both cases, it is important to determine your financial situation and limits before starting the financing process.
What Your Credit Score Means
When you begin the car financing process, be aware that your credit history may affect your finance rate. Your score can indicate to a financial institution whether you are a good or poor credit risk and can be a determining factor, in some cases, whether or not you receive financing and what your finance rate and fees will be.
It is important that you get a copy of your credit report before going to a dealership so that you are aware of what creditors will see. There are several online services as well as major credit reporting institutions that can assist you in obtaining your credit score. If you’ve already checked your credit score and are ready to begin financing with Enterprise, contact your closest location to apply for financing to get started.
Things to Consider
When it’s time to buy a vehicle, there are many factors. Do you buy new or used? What brand and model do you purchase? What do you choose? How will you pay for
Once you decide that financing a vehicle is the right choice for you, there are some important things to keep in mind before you head to the dealership:
- Your first step should be Determining How Much You Can Afford to spend on this purchase. Also, you should understand What Your Credit Score Means and be aware that your credit history may affect the finance rate you receive. Obtain a copy of your report so you’re prepared to negotiate auto financing correctly.
- Decide the price range for your vehicle purchase and do some research to find out its value and selling price.
- Consider optional protection products and understand what value they bring to you.
- If you’re confused by some of the options or don’t know what they mean, go to our Financing Terms section.
- Research and compare annual percentage rates and financing terms from several finance sources, including banks and credit unions.
Once You Arrive at the Dealership
Be prepared and remember several points:
- Have a price range in mind and stick with it. Don’t go out of your comfort zone and stay within your budget.
- Work with your financial institution and negotiate car financing arrangements that work for you and that you know you’ll be able to fulfill.
- Be sure to read the contract carefully before you sign anything.
With an understanding of the buying process and a partner you can trust, there’s no reason why financing your vehicle should be an unpleasant experience.