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How your Credit Score Affects your Toyota's Financing

Posted by Josh Chang on Wed, Aug 27, 2014 @ 08:00 AM

Credit Application copy

When purchasing a new vehicle, you have three options for paying for your vehicle: paying cash, financing it, or leasing it. While most people might say that paying cash is the first choice so you own your vehicle outright, not everyone has that much money to spend on a vehicle purchase. One option in this situation is to finance the vehicle, where you receive a loan and pay it back to the bank over time, at a certain interest rate. The third option is leasing, which is essentially a 2-3 year rental of the vehicle, where you'll be paying less than if you bought the car and sold it after the same time period.

Research shows that financing is often the most popular choice, as customers own their vehicle, but aren't paying a huge amount up front to buy the car. We will take a look at just what goes into financing a vehicle, and how your credit score might affect your loan.

So you have decided that financing your new car is your best option. Now you need to determine how you want to get your loan and more importantly, who will give you one. For new Toyotas, the most popular solutions are either through Toyota Financial Services, or through a bank or credit union. The whole process is usually facilitated by the dealership you're buying from. Here at Wellesley Toyota, our all-in-one Sales Managers will take care of your financing needs for you!

Which Lender Should You Choose?

Manufacturer loans such as those through Toyota Financial Services are available because they are convenient and everything is handled by the dealership. However, they might not always be the most competitive and you are subject to their terms. A bank or credit union is effective because they all want your business and will compete for it by offering you a lower interest rate if you have good enough credit. However, depending on whether the dealership works with them, you might have to do some of the work yourself.

describe the imageHow Is Your Interest Rate Determined? 

This is where having a good credit score is hugely important. After you fill out a credit application, your lender will have access to your credit history to see if you have a history of paying off your credit purchases reliably and on time. Typically, anything above 700 is considered a good to great credit score. Once you start dipping below 700 and into the 650-600 range is where you may run into loan problems. This is a result of lots of missed payments, credit delinquincies, or several other factors.

Your lender will take all of this into consideration before deciding whether or not giving you a loan is a risk worth taking on. Assuming you have decent credit and get approved, you will receive an interest rate from the lender. This interest rate represents the percentage that they are charging you for the loan. If you have a lower credit score, you might be hit with a higher interest rate.

What Does 0% APR Mean?

Zero percent APR is typically offered through your manufactuer's financing solutions (like Toyota Financial Services) and is a great option when avaialble. It simply means you won't be paying any interest on your loan! So, imagine taking the purchase price of your vehicle and spreading it over a certain number of months, you're basically paying off the vehicle over time for no additional cost. The only downside of 0% APR's is that they are only available on certain models and certain lengths, as determined by the manufacturer. You also usually need a credit score of at least 680 in order to qualify for a 0% APR offer.

At Wellesley Toyota, we offer the majority of our loans through Toyota Financial Services, but also work with other banks for new and pre-owned financing. Our all-in-one Sales Managers will take care of all your financing needs, so you won't be handed off to a separate manager like at other dealerships.

To learn more about our our financial services and how we can best help you, visit our Online Finance Center by clicking the link below, or call us here at Wellesley Toyota at 888 556-7538.

Topics: Wellesley Toyota, Toyota Financial Services, Finance, Interest Rate, Zero Down, APR, Credit Score, Lender

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