It can be confusing shopping for a new or used car; although, shopping around and visiting several different dealerships can help you better understand how auto financing works. Additionally, shopping around can help you save money because you’re able to compare auto finance offers and the amount of your monthly car payment.
With auto finance, there are several factors to consider when determining how much you will be paying every month to own your car. The actual loan amount isn’t necessarily the same as the overall cost of the car; if you have a vehicle to trade in or you are able to come up with a down payment or deposit, you can reduce the amount you are borrowing. The APR, or annual percentage rate is the interest rate you are paying on your loan; even a small difference in that rate can raise or lower the amount you have to pay back. And the term or length of the car loan is the amount of time you have to pay back the loan. Most finance companies generally offer a loan term of between 4 and 7 years; the longer your term, the lower your monthly payments are.
Most large dealerships have a specialist who can help you with the auto finance process. If your goal is to keep your monthly payments as low as possible, you may want to take the loan out for as long as you can; however, if you make larger payments each month and pay off the loan sooner, you will own the car sooner which can be an advantage when it comes to selling it. Everybody’s situation is different; the dealership’s loan specialist can work with you to find the best option. Getting auto financing at the car dealership means that you can buy the car and arrange financing all in the same place.
look for special auto offers, especially towards the end of the year when car dealers are eager to sell that year’s cars before next year’s models arrive. Offers and discounts typically include not having to pay any down payment or deposit, being given more credit for a car you are trading in or being offered a lower interest rate on your loan. And you have probably seen those ads offering several thousand dollars off the MSRP, or manufacturer’s suggested retail price. Just do your homework and make sure any auto offers are as good as they sound.
Some finance companies specialize in loans to refinance your car if you are currently making payments, which can get you a lower interest rate and lower monthly payments. And leasing your new vehicle may be an option if you just want to keep the monthly payments as low as possible; it’s a sort of long term rental plan in which you aren’t actually buying the car. Taking the time to understand how auto finance works can have you driving that dream car off the lot in no time.