In a car buying deal, nobody wants to be the dumb buyer. You have to be smart or you end up losing more money than you ought to. ‘Ought’ because you do have to pay for the car and ‘ought’ because there’s just no way of avoiding it. However, that doesn’t mean that you should pay an outrageously high price. Because not everyone has the necessary cash in hand to pay for a car right then and there after a deal is closed. Unless, of course, you’re Bill Gates. Then again, why would business genius Bill Gates pay cash for a car when he could probably pay less for it on a loan? You see, THAT’S the key to playing smart.

It is a very common scheme among car buyers to first get money in order to buy a new car. The term is called “auto financing” and it simply means how you pay for a vehicle. You can finance a car by taking out an auto loan to own a car, in which case, you have two options: You either use the money from the loan to buy the car, or use it for lease. Later on, we’ll discuss the topic of the advantages and disadvantages of buying or leasing a car, but first, let’s talk about auto financing, in the general sense.

How Important is Auto Financing?

Don’t look at the shiny object! Don’t look! Shinies are bad! Expensive shiny objects are especially bad! They could drain your entire life savings!

While that much is true, you can’t really expect people to stop focusing on that shiny new car, and instead think about the subject of auto financing. But then again, the most important part of car buying is actually auto financing. So take the above-mentioned advice and just ignore the fact that it sounds slightly paranoid.

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If this isn’t your first time buying a car, you might already know that the salesman or your car dealer will be checking your credit report before starting with the negotiations. But this is not the only way you can go to get that new car of yours. The seller will try to sweeten the deal and offer you special car finance situations in exchange for throwing yourself completely at his mercy. That is not a path you have to choose. The key is preparation. Knowing what auto financing options you have before you get to the dealership will mean that you can take charge of your credit and take charge of your car loan.

Just remember: when you negotiate with the salesman for the most favorable auto loan, nothing is permanent until you have it in writing. So haggle and then haggle some more. Once negotiations seem to be over, that’s when the sales contract is prepared.