Finance Center

What Does It Mean To Finance a Car? 

Financing a car means taking out a loan to purchase it. In exchange for the loan, buyers agree to pay back the original amount (the principal) as well as accumulated interest over a set period, known as the loan term. The first loan payment is typically due 45 days after finalizing the paperwork, and subsequent payments follow a monthly schedule. The amount owed per month primarily depends on these three factors:

• The principal: A lower loan amount correlates with a lower monthly payment. 
• The annual percentage rate (APR): The APR is the rate at which interest builds on the loan.
• The loan term: A longer loan term means a lower monthly payment since it spreads out the total over a longer period. However, it also means vehicle purchasers are likely to pay more overall to satisfy their loan obligation because interest has more time to accrue.

What Factors Determine the Auto Financing APR?

While certain lenders may have proprietary systems for determining the auto financing APR, they generally consider the following factors:

• Down payment: A higher down payment usually leads to a lower APR. That’s because it decreases the lender’s risk and minimizes the odds of the loan balance exceeding the vehicle’s value.
• Vehicle’s age: Buying a new car often yields lower interest rates, likely because a new car is likelier to have a longer usable life.
• Loan term: A shorter loan term typically results in a lower APR because the buyer agrees to pay back the lender in a shorter amount of time.
• Debt-to-income ratio: Debt-to-income ratio refers to the amount of debt the buyer owes relative to the amount of money they regularly earn. A lower ratio should yield a lower APR because it means the loan taker has less debt and is likely more capable of paying back the loan in full.
• Credit history: Having a higher credit score can result in a lower interest rate, but a low credit score doesn’t bar buyers from qualifying for an auto loan. Working with the right finance center, like the one at Jim Burke Ford, can help customers secure financing that aligns with their budget.

How Long Are Auto Loan Terms?

Loan terms are typically available in 12-month increments. The most common loan terms are between 12 and 60 months, but it’s not uncommon to pay off an auto loan across 84 or even 96 months. Buyers can pay off their loan before the term’s end if they’re able. That would allow them to not only gain full ownership of their vehicle in less time but also to save a considerable amount in interest.

How Is Leasing Different From Financing?

Auto leasing is an agreement between a customer and a dealership in which the customer has the right to use a new vehicle for a specified term without owning it outright. They just have to pay an upfront amount to account for taxes and fees on the vehicle and monthly installments for the length of the lease. Lease terms are typically 24 to 36 months, though some leases last upward of 60 months and some dealers are willing to work with customers on a shorter-term basis. 

Though leasing and financing both make it easier to afford the use of a vehicle, they differ significantly in the following areas:

• Ownership: Financing grants ownership of the vehicle, whereas leasing is more like a long-term rental.
• Use: Drivers who finance a vehicle can customize it to their liking and drive it as much as they want. Leasing typically bars motorists from customization and often comes with a yearly mileage limit.
• Down payment: Financing requires a down payment, but leasing usually doesn’t.
• Monthly payments: The monthly payments for a car loan are usually higher than those for a lease.
• End of term: Ideally, at the end of the financing term, drivers will have paid off the vehicle and acquired full ownership rights. However, when a lease ends, drivers must return the vehicle to the dealership, renew the lease, or purchase it.

Is It Better To Finance or Lease a Vehicle?

Whether drivers should finance or lease their vehicle at Jim Burke Ford depends on their needs and preferences. For those who want to own the vehicle they pay for and enjoy an unrestricted driving experience, financing is probably the better choice. Drivers who just want temporary use of a particular model and aren’t concerned about outright ownership may want to consider leasing.

Financing Made Easy at Jim Burke Ford

At Jim Burke Ford, our finance center’s mission is to make financing as easy and stress-free as possible. We work with top lenders to get the most competitive loan rates so customers can choose the option that best satisfies their needs. 

Not only that, but we make a point of supporting every customer’s vehicle financing journey before they even step into our dealership by helping them get preapproved for their auto loan. Preapproval helps buyers set a more realistic budget for their monthly car payments. What’s more, customers with preapproval stand a better chance of getting approved on the spot for the loan they want. 

Get Financing for Your Vehicle Purchase in Bakersfield, California

The finance center at Jim Burke Ford is always happy to help new customers get behind the wheel of a brand-new Ford. If you have any questions about our financing process, we encourage you to reach out to us online or call 888-699-0562.

We’re a full-service dealership, so in addition to vehicle sales and financing, we offer comprehensive maintenance and repairs at our service center. Schedule your service appointment today.