New Car Finance Often Starts With The Dealer But With Final Approval By Someone Else. - Finance - Loans

<p>Car dealers have a certified franchise with one or more car manufacturers. They do not work for the manufacturer; the manufacturer does not possess the dealership. What a dealer does is purchase cars from the manufacturer, usually with huge "floor-plan" loans from a bank or finance company. Interest is charged by the bank on these loans. Dealers have to sell the cars off to pay these loans with related interest, as well as cover other operating expense of organizing a business. This includes selling new cars online.</p>

<p>The dealers always receive cash, after he sells or lease a car, whether it's straight from the customer, or from a finance company or bank who has loaned a customer the money.</p>

<p>Dealers dont actually do new car financing loans, leases or used car loans. Dealers are not bankers and dont set new car loan rates. They do not directly finance cars they sell or lease. They work with some financing companies or banks to provide the customers with finance. The dealers arrange financing as a service on customers behalf. If the customers choose he can also arrange his own financing.</p>

<p>However, dealers play an important part in pre-approving car financing and setting new car loan rates. A dealer may do a brief introductory check of a customer's credit account using any of the main credit reporting agencies. This is not done for loan or lease sanction, but only to decide if the customer has such serious credit problems that it would not be favorable to carry on with the deal.</p>

<p>A transaction is not completed after your car finance contract is signed. Many customers wrongly presume that when the dealer says he has done a credit check and let the customer sign papers that the deal is done and the whole thing is officially wrapped up. Thats totally wrong. The deal is not finished until financing has been set and the dealer has been paid for his car.</p>

<p>When a customer finances a car with a loan, he or she signs papers that basically reads as: " I agree to purchase this car, using finances that will be loaned to me by a finance company or bank (if I am approved), and that the dealer will endeavor to position this loan for me, and, if the funds are not agreed by a finance company or bank, the deal is void unless the dealer can find a different finance company that will approve me. If the loan is agreed, the finance company or bank pays the loan that was funded, directly to the dealers. The bank will then work straight with me to assemble monthly payments to repay that loan. In this way the subprime auto loan lender will have then been paid in full for his car and will no longer be involved in the lease or loan."</p>

<p>If the new car finance or used car loans are not approved, the finance company or bank may have found problems in the customer's credit history/score or debt-to-income statistics that makes them flag the application as great risk. The dealer is then asked to notify the customer that the application was not accepted, or that a co-signer is required in order to re-submit the application for approval. Finance companies and banks work through the dealer; they do not work with the customer straight until the payment book arrives after consent.</p>

<p>At this point what are your choices? First, the customer should always be acquainted with their own credit history previous to approaching the dealers showroom. Second, the customer can inquire the dealer if he works with other banks or finance companies that might be willing to grant the loan or lease. Third, the customer can at all times shop for his own new car finance or used car loans. Also look at new cars online you may find many options there including auto loans approval and at new car loan rates better than offered by the original bank.
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