what does it mean to finance a car

Financing a car means getting a loan from a bank, dealership, or other lender to pay for the vehicle. When you finance a car, you can either finance the full cost of the vehicle or make a down payment using cash and finance the rest of the purchase. You pay the loan off in monthly installments, plus interest, over a predetermined period of time. Most auto loans are secured, meaning your car is used as collateral. If you stop making your loan payments, the lender has the right to repossess your car. Financing a car adds to the total cost of the car because youre paying for the cost of credit (interest and other loan costs) in addition to the cost of the vehicle. There are two primary methods of borrowing money to buy a car: direct and indirect. A direct loan is one that the borrower arranges with a lender directly. Indirect financing is arranged by the car dealership where the car is purchased.