Car buyers needing auto financing may not qualify through a bank or standard auto loan company. That is where non-traditional loan companies can help.
How does auto financing work
Dealers sell their cars to individuals, or in some cases businesses. If the buyer does not have their financing worked out with their bank in advance, the dealer will help get financing set up. They bring in a third party to finance the car. Most dealerships will have several financial institutions working with them to set up the loans, and the loan company will give the dealership a percentage.
What the buyer needs to know
When buying a car, it is a good idea to get approved for a loan in advance if possible. Sometimes if a buyer has a low credit score or the buyer doesn’t have a credit history yet, they may need a specialty loan company, such as Consumer Portfolio Services. Specialty loan companies will finance the car loan just as a brick and mortar bank, and will have convenient online payment capabilities. This is especially helpful for people needing help getting a car loan. If you can’t get approved before going to look at cars, talk to the finance person at the dealership. They can work with you to help you get a loan so you can get behind the wheel. This is often the easiest way to get financing if you don’t have much of a credit history, or have had credit issues in the past.
After the purchase
Many car dealerships will sell the car loan to a finance company. The finance company simply pays the dealership an agreed amount, then takes on the loan. This usually has no impact on the buyer, other than changing where to send the payments. This is a normal business practice, and allows the dealership to focus on car sales, and not financing loans. Loan companies can also help the buyer with any questions about their loan, the value of the vehicle, payoff information and other related questions. Reputable loan companies will work hand in hand with a dealership to help put buyers in a car. If you are thinking about buying a car but not sure you will qualify, it never hurts to ask.