How to Finance a Used Car – Getting it Right

The fact you’re reading this article probably means you want help on how to finance a used car purchase.

It would be nice to say that if you contact the “Free Money On Demand” company, they’ll immediately deliver a truckload of cash to your front door and charge you nothing for it. If only!

In reality you’re probably going to have to think a little about things and avoid rushing in – at least if you’re looking for the best deals possible.

Try to clarify your own financial position.

Before you get any loan from anyone, you will need to be able to explain your overall financial position. They’ll most likely need to know how much you’re earning, the nature of that income and what your monthly outgoings are.

They need this to try and understand how much you can realistically afford to pay back each month and from this they’ll know the maximum amount they could lend. You won’t help your case if to start with potential lenders see that you’re unclear about things as basic as how much you earn each month or how much you’re already paying out on things such as mortgage or rent. It won’t create a picture that you’re in control of your finances!

Deposits = confidence & lower cost.

Many lenders like to see that you are contributing some money to the purchase. The percentages may vary but asking for a big loan when you’ve only got 14.75 pounds to offer as a deposit won’t inspire confidence. There may be some zero deposit deals available but it’s worth remembering that these mean you’re borrowing more and therefore the repayments will be higher. In some cases ‘zero deposit’ interest rates may also be higher.

Keeping your feet on the ground.

Any professional and scrupulous lender will want to see that the value of the asset (car) bears some relationship to the reality of what you are trying to borrow and proposing to pay for it. Many lenders will have a comprehensive knowledge of vehicle values and while you think that 20-year-old rust-bucket is in fact a future antique and a snip at the price – they may not share your optimism.

Thinking about the options for financing.

If you have verifiable regular income and assuming you do not have a catastrophic credit history, you will probably find that there are many lenders around such as banks, building societies, finance companies etc. It may pay to avoid the temptation to take the first one offered just because it means you’ll get the car faster. You may get a much better lower-cost loan by shopping around or getting someone to shop around for you.

Recognising the complexities of car finance deals.

If you’re not completely comfortable with the complexities of interest rates, repayment periods and service charges, or if you have a history of credit problems, then you may want to think about using a specialist car finance service.

That’s because it’s not always easy to tell at a glance what the best offer is for your particular situation. There are specialist car finance websites that do offer a broad-spectrum knowledge of how to finance a used car and you may learn a lot from reading through their services and advice. More importantly, you could also save yourself a lot of money!

Financing a used car will for many be easy. How to finance a used car in the most cost-effective fashion may be more demanding and need a little preparation combined with expert help to find the right deal. Good luck:

Finance a Used Car With A Lien

To finance a used car with a lien is not that difficult and is a pretty common occurrence now days. This is because most people have a lien on their car when they go to sell it. Gone are the days that someone pays off their car and keeps it until it dies.

Let’s begin by explaining what a lien is…

A lien is a put on a piece of property, in this case a vehicle as assurance that the borrower will pay the debt in full. It is a form of security for the lender.

When anyone finances a car, new or used the bank places a lien on the vehicle until it is paid in full. This gives the lender the right to the title also. Once it is paid in full the lender releases the lien and the borrower owns the car outright.

Now you will become the holder of the title.

Buying a used car from someone who owns the car outright and is the holder of the title is definitely an easier choice but there are times when it simply isn’t possible.

So, if you have fallen in love with a vehicle that you simply must have but it still has a lien on it, let’s take a look at how to finance a used car with a lien.

If you’re buying from a private seller…

Never hand over cash to the private seller that still has a lien on his or her vehicle they are trying to sell. This is because you have no guarantee that the person will pay off the loan releasing the lien.

If they don’t pay off the lien…

You are out double; you have lost your money and you cannot legally own the car.

Begin by speaking with the person who is selling the car. Discuss which lending institution holds the lien on the car. Ask how much he owes on the balance of his loan.

You will want to know this information.

If the seller owes more that what the vehicle is worth you will want to know how the seller is going to pay the balance off.

Usually the seller is more than willing to share this information in order to sell the car more quickly.

Once the lien is paid off the lender will issue a separate release of lien on the car.

Once you have purchased the car you will want to get a bill of sale from the seller. This is not a step you can afford to miss because you will need this bill of sale for the next step.

Now take the lien release, bill of sale, proof of insurance as well as the title to the DMV (Department of Motor Vehicles) and then they will issue the title in your name with your bank as the lien holder. At this same time, the DMV will collect any taxes due for the vehicle.

So be sure to take your checkbook.