Most people don't have enough money to buy a new car with cash, so they have to take out a car loan. Once you know what kind of car you want to buy, the next important step is to find a good lender. You might not have any trouble getting a car loan, but you should still look around before choosing a lender. You can do this by going to a bank near you or by looking online for car loan financing options.
If your credit is good, you might even want to choose a lender before going to the car dealership. So, you can get approved ahead of time for a certain amount of cash. Once you've been preapproved, you know how much you can spend. You'll be less likely to look at cars that are too expensive for you. If dealers know you already have a loan, they may be more willing to work with you on a deal. Most salespeople work on commission, so if someone has already been approved for a loan, they will do their best to help them.
Interest rates and the down payment
What kind of car loan financing you get will depend on how much you put down at first. The lower the rate of interest you can expect to get, the more money you put down. If you put more money into the car up front, lenders will see you as less of a risk. A "no money down" offer at a dealership may make you want to apply for a car loan, but you should know that the interest rate terms might be much higher.
How long you have to pay
Up until recently, a car loan could only be paid off over sixty months. Seventy-two and eighty-four month payment plans are now being offered by dealers. Because of this, people are buying more expensive cars that would usually be out of their price range.
Even though you might want to buy a $40,000 SUV, you probably shouldn't unless you can pay for it in five years. Remember that you have to pay for all repairs after the warranty period is over. When people pay for their cars over seven years, they usually end up owing more than the car is worth.
