How Does Car Financing Work?

How Does Car Financing Work?

There are a lot of decisions to be made in the car-buying process. Once you’ve decided you want a new Mercedes-Benz vehicle, then you should decide if you’re going to buy or lease. If you decide to buy a car for your Caledon commutes, you might be wondering, “what is car financing?”. Mercedes-Benz Brampton is here to walk you through the car-buying process! We have the answers that will help you understand how car finance works.

What Does it Mean to Finance a Car?

How does car financing work? Simply put, the answer to what does it mean to finance a car is that you borrow money from a lender to pay for the car, then you make monthly payments to the lender to pay off the loan before you own your car. The lender will charge interest on the loan, which is a percentage of the total loan amount added to the monthly payments. Consider it the fee for borrowing the money. Here are the factors lenders consider:

  • Credit Score
  • Debt-to-Income Ratio
  • Age of the Vehicle
  • Loan Amount
  • Repayment Term / Length of Loan

Find How Car Finance Works for You

How does financing a car work? Whether you’re in Orangeville, Georgetown, or elsewhere, the car financing process is essentially the same. The first thing you need to do is some math to see how much you can afford:

  1. After answering, “what is car financing?” your next step is to calculate how much money you need to borrow. You do this by taking the price of the car and subtracting your down payment. If you have a poor credit rating you’ll need to plan on making a larger down payment.
  2. If you have a car to trade, value your trade and subtract that amount from the cost of the car.
  3. With this information, use our payment calculator to get an idea of what monthly payments to expect.
  4. Apply for loans. You can apply at banks, or apply for car financing with Mercedes-Benz Brampton. Our finance centre will shop for loan rates for you.
  5. Comparing interest rates and payment plans from lenders is the only way to ensure you’re getting the best deal.

Learn How Car Finance Works with Mercedes-Benz Brampton

Now that you can answer, “What does it mean to finance a car?” and “What is financing a car?”, it’s time to learn more about the car-buying experience with handy car-buying tips from Mercedes-Benz Brampton, including our guide on trading in your financed car, and in-house financing with a car dealer. Our finance centre is here to walk you through the entire car finance journey!

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