How does financing a car work?

I want to buy a new car, but I don't have the money to pay cash. I'm also not sure how financing works. Could I get an explanation so I know what to expect?

Answer provided by
Eric Schad
Answered on Apr 27, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
“Auto financing is a process where a lender gives you money to buy a vehicle and uses that vehicle as collateral for the loan. In return, you get to drive the car, but you have to pay back the loan amount (principal) with interest (APR) as stated on your contract within a certain time frame (usually 48 to 84 months).
To secure financing, you’ll have to show proof of income and have decent to good credit; you may also need to make a down payment.
Keep in mind that if you finance a car, you’ll also likely be required to carry collision coverage and comprehensive coverage on your car insurance. Make sure to budget for this and to shop with Jerry to get the best rates from dozens of insurance companies.”

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