Auto Loan
Oftentimes deciding on how you?re going to pay for a new or used car is more complex than choosing the car itself. There are a myriad of car loan options, some of them good and some of them not so good, that can either help you get the car of your dreams or saddle with you upside down car loan that can affect your finances for years to come.
- Find out how much you can afford
Just because you qualify for a 25k dealership auto loan doesn?t mean that you can actually afford it. You have to be very honest about your current financial situation and think about a monthly payment that you will be comfortable with. Sites like smh.com, automotive.com, and insider car secrets.com have great information on helping you plan out a sensible auto loan that will leave you with enough money to not only afford the car that you want but the ever-increasing cost of gas as well.
- Shop Till You Drop
The key to getting a good car loan with a low interest rate is to get as many competing offers as you can. One of the first things you can do is to check out your own financial institution?especially if you belong to a credit union which often specialize in offering very affordable car loans.
Another option is the numerous online car financing websites that can offer you competitive car loan deals. Some of the most reputable ones are bankrate, e-loan,?lending tree, capital one auto insurance, and car loan.com. They can give you a quote within a few minutes, and based on your credit, can often offer you a much better interest rate available from a dealership. Also, many of the car browsing sites such as carsdirect.com, cars.com, autobytel.com, and Edmunds.com have relationships with lenders to give you the largest possible net when shopping for a car loan.
Then there is always the dealership car loan route. Many people will tell you to avoid this option but it can actually be quite profitable for you. The key is to have financing options already set up with the aforementioned lenders to provide leverage, as well as take advantage of current manufacturer rebates. These rebates can allow you to get a low interest rate as well as cash back in your pocket.
- Signing on the Dotted Line
Consider this a crash course in car loan economics. Basically there are three different kinds of car loans: 48 months, 60 months, and 72 months. The longer the term, and the lower the down payment, the higher the interest rate. This is because the lender has to make up that money somehow; it?s basically up to you to find out where you want to make it up.
A good rule of thumb when financing a car loan is that for each $1,000 you contribute to your down payment you are knocking $20 off of your monthly payment. This may not sound like much but it can definitely add up over the course of a loan. Also you probably only want to consider an auto loan of this kind if you plan on keeping the car for a duration of at least 4-5 years.
- For Those Who Can?t Commit---Going the Leasing Route
If you?re the kind of person who likes to drive the latest and newest automobiles, but don?t really want to own it for the rest of your mortal life then leasing a car is probably your best option. When leasing a new or used car there is very little money required for a down payment and your payments are much lower. This is because you are paying for depreciation, not equity. This makes it an ideal choice for people who like to switch out their cars every 2-3 years. But be sure that you have plenty of yearly miles built- in, otherwise you?ll pay horrendous overage fees that can often leave people making it cheaper if they had purchased the car outright.