It all looks so simple when you see the TV ad for the car of your dreams: “Zero down.” “We work with all levels of credit.” Before you get excited about the possibility of driving off in that cool car, empower yourself as a buyer by understanding a few basics about financing.

Credit matters
We all know your credit score is the key that unlocks how much financing you receive and interest rate.  According to bankrate.com, borrowers who received financing for a new car in Q4 2018 had an average credit score of 718. Those who borrowed money to buy used cars had an average score of 659. If you have a credit score below 600, financing for a new car is possible, but you likely face higher interest rates. If you are not in need of a car, it may be best to wait and increase your credit score for better financing options.

Shop around for the best financing
There’s no rule that you must finance your car with a dealership. Although some dealerships offer competitive financing options, it’s smart to shop around online and through your local bank. Online financing options continue to grow in popularity with potential car buyers getting answers almost instantly.

Be careful when shopping around. Banks pull your credit report and too many reviews of your credit could impact your score.

Lease or own
If you’re looking for a more flexible financing option, leasing might be the way to go. When you lease a car, you basically pay to use the car for a period of time – 36 months is average – paying only a portion of the cost of the car. Leasing monthly payments are typically lower and enable you to drive a new car off the lot with less invasive financing reviews that occur when you attempt to buy a car.

Downsides of leasing vs owning a car: There are strict rules for leasing, including set mileage. If you decide to keep the car after your leasing term is complete, you could end of paying more than you would have if you purchased the car from the start.

With CarSnoop, we will help you navigate the lease versus own experience as you enter into the car buying search.