 TITLE: Do You Need Credit to Buy a Car With Cash? CONTENT: How Financing a Car Works\n-------------------------\nTo decide whether using a loan to cover all or part of your car purchase is the right option for you, it may help to understand how financing works.\nFinancing a car involves a few basic steps:\n1.  Set your budget.\n2.  Choose your car (or a few options).\n3.  Figure out your down payment.\n4.  Shop for financing:\n*   Get preapproved for a loan at your bank or credit union.\n*   Research online for the best auto loan.\n*   Work with your dealer.\nAlthough financing options exist for buyers at almost every credit level, the best interest rates and terms go to buyers with very good to excellent credit scores. Lenders will also want to verify your income, to make sure you're able to repay a loan. Having a substantial down payment helps your case. You can use this cash to reduce the loan amount, thus reducing your monthly payments, interest and the risk to your lender.\nIf you're building credit, financing a car can help. Making your loan payments on time adds to your payment history, the most heavily weighted portion of your credit score. Having cash on hand also increases your chances of success. You're unlikely to default if your payments are already covered (or almost covered) by savings. An auto loan also adds to your credit mix: Being able to show that you can manage various types of debt can help you improve your scores. END