A Look at On Lot Financing Vs. Secondary Financing.

There are a few different types of financing when it comes to financing your new vehicle. In this article we will be taking a look at on the lot financing and secondary financing for getting your new car.

A Closer Look at On Lot Financing

If you've been searching for a vehicle to purchase, but your credit is not that great, one term that you might have heard is "on lot financing." Many people don't know what on lot financing is, but this type of financing can be the perfect way for you to get a car loan for that car you need to have. The main difference between car dealers that offer in-house financing and other lots is the fact that these car lots don't deal with fancy lenders or banks. The dealers take matters into their own hands and finance their vehicles for the customers themselves. This beats out the middle man and the long credit application, and it makes it much easier for both dealers to sell cars and for consumers to get cars when their credit scores aren't perfect. On lot financing gives you a much better chance of getting that loan you need for the car you need. It gives the dealers more flexibility and ensures that they are able to work with you. Usually, if you have an income source, proof of address, and sometimes a down payment, they will get you into the car you need.

A Closer Look at Secondary Financing

Secondary Financing or a subprime auto loan is a type of auto loan approved for people with substandard credit scores or limited credit histories. You may be a recent graduate or recently divorced and finding that your lack of a credit history is making lenders reluctant to give you financing. In those cases, it’s not that you have bad credit, you may not have a credit history at all. That puts you in the sub prime category. There is no official cutoff score for prime versus subprime, but these loans can carry higher interest rates than prime loans would, and may also come with penalties if you choose to pay off the loan early called prepayment penalties. On the bright side, this type of financing can improve your credit score if you continuously make on-time payments. If you have ever been turned down for financing at a dealership, it was probably because your credit score puts you in the sub prime category. Dealerships generally qualify auto loans for private lenders who are only interested in prime borrowers.

Comparing the Two

Both of these types of financing are directed at people who do not have the best credit, or have little to no credit history at all. Buy Here Pay Here dealers utilize either of these financing methods, depending on the lot, to get you into your new vehicle. It is important to consider what is going to work best for you when trying to decide on a car loan.