Don’t Be Intimidated. The Car-buying Finance and Insurance Process Explained!The car-buying process can be intimidating, especially for the first time. Picking out the vehicle you like is just step one. If you’re wondering what to expect when it’s time to sit down and close the deal, keep reading. We’re sharing the basics about the car-buying F&I process.
What is F&I?F&I is shorthand for Finance & Insurance. After you’ve purchased your vehicle from a salesperson, you’re turned over to the “F&! Manager” who will guide you through the final paperwork for your vehicle.
What is a finance and insurance (F&I) department?The finance and insurance department of an auto dealership is in charge of marketing loans and optional add-ons to customers after they have agreed to buy a vehicle. During the F&I process a manager may ask if you’d like to buy things like an extended warranty, a vehicle service contract, GAP insurance, and/or credit insurance.
What is an extended warranty?An extended coverage warranty is usually offered at a new car sales dealership. The extended warranty works exactly as it sounds. It’s an extension of the coverage available from the standard warranty offered by the manufacturer.
What is a service contract?The vehicle service contract covers problems with mechanical and electrical parts not covered by the manufacturers’ warranty. Service contracts are usually sold by used or Pre-owned dealers who do not offer extensions of the manufacturers’ warranty. Learn more about options for purchasing a service contract at Krietz Auto here.
What is GAP insurance?GAP insurance covers the difference between what you owe on an auto loan and what insurance pays in the event that your vehicle is stolen or totaled. Learn more about purchasing GAP protection from Krietz Auto here.
Car LoanDuring the F&I process, a finance or sales manager will also go over your financing options. When you’re purchasing a vehicle, you can either finance a loan through your own bank or credit union or you can choose to finance through one of the dealership’s lenders. Most buyers choose to borrow from the lender who offers them the best interest rate. Your interest rate is determined by things like your credit rating, employment status, and income.
Taxes and TagsTaxes and tags are another consideration you and a sales manager will discuss during the finance and insurance process. There’s a fee for taxes and tags that is determined by the following:
- The county the vehicle is registered in.
- The vehicle weight.
- The type of license plates requested.
- Whether or not you have a trade-in.
- The state in which you live.
- New car sales tax OR used car sales tax.
What fees will I pay when I buy a car?People are often concerned about “hidden fees” associated with the car-buying process. Here are the common fees you can expect to pay when you purchase a car:
- Dealer processing fee – printing and processing of paperwork. set at $300 for the state of Maryland, but varies by state and can cost upwards of $800-$1000
- Sales tax- determined by your state of residence, may range from 2%-8%
- Title fee, Tags and Registration -determined your state of residence. this is the cost to legally register a vehicle in your name and obtain the title and license plates
- Destination Fee (new car dealerships) – the cost of vehicle transport. can cost between $1600-2000