Can luxury car financing fit into your budget? This is a question many car buyers face. If you want a luxury car but are uncertain if a new ride can fit your budget, there are a few things you need to know about luxury car financing. Read on to learn more about the process.
Where Luxury Car Financing Comes From
The market for luxury cars is on the upswing. According to MarketWatch, in 2022, luxury cars accounted for about 18% of new vehicle sales. With the expansion of the market has come the expansion of financing for luxury vehicles. There are several sources where you can secure luxury car financing. Some of the most common sources of luxury car financing include manufacturer financing, bank financing, and credit union financing.
Many manufacturers offer financing options, including some budget-friendly options. Banks, credit unions, and other lenders also offer luxury car financing options, all under different terms. You may have to shop around to find the terms that will suit your budget.
What Lenders Consider
Securing financing for a luxury car is very similar to securing financing for any car. The lender will evaluate your credit score, the loan-to-value ratio of the vehicle, and your ability to pay the loan. If you are going from owning a 1998 Chevy Nova to purchasing a 2023 Lamborghini, that may raise some eyebrows. Lenders may look at your previous car ownership history to get a feel about whether you are experienced in this type of ownership.
A luxury car is a significant investment. According to Etags, coolant and engine issues are the most common car problems. About 118,163 drivers report these problems, but it is a different kind of problem when it is a luxury car. Lenders evaluate your experience to better understand your ability to manage the collateral.
How You Can Be Affected
Luxury car financing is like any other car financing deal. You will need to maintain comprehensive coverage on the vehicle. Comprehensive coverage at this level can take a big bite out of your budget, especially if you have had some driving tickets in the past. According to the Department of Transportation, alcohol and drug use causes about 15,000 deaths and injuries every year on the roads in the United States.
A past DUI charge can stay on your driving record for up to 10 years. DUI, reckless driving, accidents, speeding, and more can all drive up the cost of insurance. It can affect your ability to secure auto insurance that fits your budget and satisfies the requirements of the lender. Other issues include overcoming a lower-than-acceptable credit score. You may be able to provide a written explanation as to why your credit score has a few dings. Another option to overcome a lower-than-accepted credit score is to pay a higher-than-normal down payment.
How to Secure Financing
Be prepared to put money down on the luxury car you are considering. The higher the downpayment, the easier it will be to secure financing. Of course, the more you put down on the vehicle, the lower your monthly payments will be and the less stress you will put on your budget.
Shop around. Don’t settle for the first financing offer. If one lender approves your financing, other lenders will, and sometimes you can find better interest rates and terms by shopping around. Consider contacting the bank that you normally do business with for financing options. You can use your relationship as leverage.
Keep in mind that sometimes you can find the best terms with a bank you already have a relationship with, especially if you have a long history and are a customer in good standing. Check all of your options before you decide. Luxury car financing is not as complicated as you think. Learn more about financing options for luxury cars today.
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