Different auto lenders offer different ways to pay for a car. Even if auto loan rates are the same, the terms and restrictions can help you choose between lenders. Look at the fine print while you compare interest rates to make sure you can buy a car where and when you want.
Inquire about APR
When you compare auto loans, the cost of the interest rate is a very important thing to look at. Even if the first rates look good, you should also think about the closing costs and fees. The cost of the loan is included in the annual percentage rate (APR). This number will help you find the loan with the lowest cost.
Just make sure you're comparing the same kind of loan each time. The rates are lower if the loan is for a shorter time. Putting down money can also help you get better rates because it will improve your credit score.
How to Plan for Your Monthly Payment
When shopping for a car loan, you should also think about how much you will pay each month. Even if the interest rate is higher, a longer loan term can help you pay less each month. Also, include the costs of car insurance and repairs in your budget.
Even though lower payments are nice, a shorter loan term can save you hundreds or even thousands of dollars in interest. Take out a $25,000 car loan at 6% interest. For a seven-year loan, interest costs add up to $5,677.64, but only $3,999.20 for a five-year loan. That means you saved $1,678.44.
Look for ways to pay sellers that are flexible.
Who would you rather buy your car from, a dealership or an individual? Is it going to be a new or used car? There are a lot of lenders who want to know how you answer these questions. Some financing options limit the stores from which you can buy. Some will give you a blank check that you can give to anyone you want.
Make sure you know what kind of car you want to buy before you apply for a loan. If you're not sure what to do, find a flexible car loan so you can keep your options open. If you buy from a dealership, you might get better rates, but if you look in the classifieds, you might miss a good deal.
No matter what kind of car lender you choose, you should apply early to get pre-approved. You'll also find out how much you can get and be able to close on a deal faster.
