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How Does Car Financing Work?

Signing Finance Documents for Car

If you’ve decided that you want to purchase a new car to enhance your Denver commute, you have a few options. You can get a lease, buy it outright, or choose a very common option: car financing. So, what does it mean to finance a car and how does financing a car work? We get questions like this a lot at Planet Honda, so we’ve compiled a brief guide for how car finance works below!

What is Financing a Car?: Figures to Know 

Financing is agreeing to a payment plan with a lender on a new or sometimes used vehicle. This lender could be a bank, a credit union, or also a Lakewood-area dealership with a finance center. In all these cases, the lender is going to need important information from you that can affect the loan amount, down payment, interest rate and payment plan. Here’s what that includes:


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

If you’re worried about your credit score, know that it’s possible to get bad and no-credit car financing with a dealership.

What Does it Mean to Finance a Car with a Dealership vs. Bank?

Arvada drivers have options when it comes to car loans. If you know how car finance works, you should be able to secure the best possible loan for you. Take into account the following factors on your budget: 

  • Down payment
  • Interest rate
  • Loan Term 
  • Monthly payment amounts 
  • Insurance rates 

So, what does it mean to finance a car with a dealership? An in-house finance center at a dealership can settle a car loan in the same place you’re buying a car. To make comparing loans easy, you can use an online payment calculator

How Car Finance Works: Finalizing the Loan Terms

For those asking, “How does car financing work?”, it’s important to know that you can (and should) negotiate the loan terms before you sign the dotted line. If you have a goal for monthly payments, you should be vocal about it and a lender will help you out. Once you’ve settled on good loan amounts and terms for you, you can take delivery of the vehicle and drive it home!

Get Car Financing at Planet Honda!

 And that’s a brief way to answer the question, “What is financing a car?”! Golden-area drivers who are on the market for a new vehicle can get car financing at the in-house finance center at Planet Honda. You can even securely apply for financing through us online! Contact us today with any questions about car financing and we’ll be happy to help!

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