Once you’ve negotiated a great deal on your new car, the hard part’s over, right? Wrong! Sometimes the financing portion of the purchase is more difficult than the negotiating part. That is, if you’re not prepared for it. And, of course, that’s the point of this site - to prepare you, and help ease the process.
So, what do you need to know about auto loans? Let’s take a look:
Rate ( APR )
Your rate is an important factor in your monthly payment - the lower your rate, the lower your payment. Pretty easy, right? There are several factors that determine what rate you’ll receive on your loan. Your credit score is a huge factor, and something that you need to be aware of. You should always obtain a copy of your credit report and credit score before you begin car shopping. Knowing your score will help you know if you’re getting a fair rate or not.
Term ( Length of loan )
Equally important to your monthly payment is the length of the loan. In the past, loans were usually 36 or 48 months - that was as long as they got. As cars get more and more expensive, auto lenders have offered longer loans to help keep payments manageable. The average loan today is between 60 and 72 months - a big jump from 10 years ago. There are even lenders that offer 84 or 96 month car loans. Could you imagine making payments on one car for 8 years?
The reason you need this information is so a sneaky dealer doesn’t use one of the Top 10 Dealer Tricks on you. You always need to make sure you’re getting a fair rate, as determined by your credit score. Also make sure to finance your car for a reasonable period of time. There is never an instance when financing a car for 96 months is a good idea - never. If you need to finance a car for that long to afford the monthly payment, then you can’t afford that car! There are plenty of other, less expensive choices available.