Financing at CarSmart of Farmington

If you're thinking about buying a new or used vehicle, you may also be considering how you'll pay for the purchase. For most people, a vehicle is one of the larger purchases they'll make. And paying cash is often out of the question for them, so they tend to seek alternative payment arrangements. Either of these two popular non-cash options works for many: financing the purchase or spreading out the payments over time.

Learn more about what it means to finance a car, the differences between financing and leasing, and why you should finance through CarSmart of Farmington.

What Does It Mean to Finance a Car?

Financing a car involves borrowing money from a financial institution or bank to purchase a vehicle. When you go through this process, the amount you borrow depends on the cost of the car, how much cash you have to put down, and your credit history. Most lenders won't offer the full value of the purchase price as a loan, because doing so is risky for them. So, the borrower must put at least a portion of the total as a down payment, which serves as collateral on the loan for the lender.

Car purchases don't usually require a minimum down payment amount, although your credit history may play a role in what's set by a lender. If you have a lower credit score, you may qualify for a better interest rate or loan term when you put more money down. The average down payment on a vehicle is around 10-12% of the total cost.

However, putting down around 20% of the cost can make a significant dent in your monthly payment and what you owe overall. On the other hand, a bigger down payment can offset the initial depreciation that affects the value of new vehicles.

The terms of the loan will dictate how much you pay each month and when the payment is due. Most lenders offer vehicle financing terms in 12-month increments. A longer-term loan can keep your monthly payment amount lower, while you'll pay off a shorter-term loan faster and pay less interest overall. When you're considering whether to finance a vehicle, it's helpful to think about these factors as you determine how you want to proceed.

Financing vs. Leasing a Car

Another question that often comes up when shopping for a vehicle is whether you should lease or finance the purchase. When you lease a car, you get a brand-new model that you can drive for a fixed number of months and miles. Typical lease terms are 36 or 48 months and between 10,000 and 15,000 thousand miles per year. At the end of the term, the lessee has several options:

  • Return the vehicle to the dealership.
  • Pay the residual value in cash and keep the vehicle.
  • Finance the residual value and keep the vehicle, making monthly payments.
  • Sell the vehicle and pay off the residual value.

The residual value of a car refers to what it's worth at the end of the lease term. The lessee pays for the depreciation in their monthly lease payment. For example, imagine you leased a new car valued at $30,000 and the estimated residual value at the end of the three-year lease was $18,000. You would pay $334 per month to cover the estimated $12,000 in depreciation plus any applicable interest.

Leasing a vehicle has a few benefits. The first is the prospect of qualifying for a lower monthly payment, since you're not paying for the car's full value. Secondly, leasing lets you drive a new car, as lease terms rarely extend beyond four years. If you're concerned about maintenance costs, driving a newer model can help reduce the overall cost, especially because the vehicle might remain under warranty throughout the lease period.

Choosing to lease a vehicle also has some drawbacks. If you decide to turn it in at the end of the lease, you'll have to either enter into a new lease or find a different car to buy. Some dealers charge turn-in fees to customers who don't enter into new leases. Also, if you drive a lot of miles every year, you could end up paying high per-mile charges at the end of the lease.

Why Go Through the Dealership for Financing?

Although banks and other financial institutions offer auto loans, there are several benefits to financing through the dealership where you plan to purchase your vehicle. The first is access to a wider range of lending options. Dealers have connections with financial institutions located across the country, and each lot will have their own options for buyers. When you complete an application, the financing department will put together offers from various lenders, and then you can choose what works best for you.

Sometimes dealerships offer longer loan terms, which is an appealing option if you want a lower monthly payment. Additionally, a dealership can provide incentives that banks and other lends may not match, such as cashback, higher values on trade-ins, and lower interest rates. As a result, a well-qualified buyer can see major savings when purchasing a new vehicle and using the dealer's in-house financing. Another key reason to opt for dealer financing is the convenience — you're already there to buy the car, so you don't have to make another stop at the bank.

Financing at CarSmart of Farmington

At CarSmart of Farmington, we make it easy to qualify for financing for your new or pre-owned vehicle. Our helpful and friendly financing professionals can work with people with good credit, bad credit, or even no credit. We have access to lenders willing to work with buyers who have struggled in the past or are working to establish credit, such as first-time buyers.

Start the financing process by filling out the CarSmart pre-qualification form, and we'll get right to work. We also accept trade-ins, which can offset the cost of the vehicle you plan to purchase from us. If you have any questions about the financing process or would like to speak to a member of our financing team, don't hesitate to contact us. We look forward to working with you and getting you behind the wheel of your dream car.


CarSmart of Jackson

2856 Sappington Dr

Jackson, MO 63755


Think CarSmart

4854 US Highway 67

Farmington, MO 63640