New Car Loans

Things to Consider When Financing a New Car

When it comes to financing a new car, there are numerous factors to consider during this important journey. While some potential car owners focus on acquiring a low interest rate, they should know that this is not the only variable that makes or breaks a new car deal. Below you will find a few things to keep in mind when comparing rates, payment plans and financing companies.

1) Interest Rates

When applying for a car loan, you will encounter the term, APR, which stands for annual percentage rate. This is the amount of money that is paid throughout the year, which is affected by the unpaid balance of the car loan. The rate you receive will be based upon your credit score. Let’s consider that you received a loan for a little over $20,000. If you possess excellent credit, you may have an APR of 3.59%, which involves a monthly payment of $646. This is an estimate for a loan that should be paid off within 36 months. If you have decided upon a 60-month repayment period, you may owe $406 for your monthly payments. If you have poor credit, you may face monthly payments between $500 and $800.

2) Down Payment Options

When it comes to establishing the amount of monthly payments you will be responsible for paying off your car, there is an important factor to consider. The amount of money that you put down for a down payment influences your monthly loan obligations. As a rule of thumb, the higher the down payment you put down on your vehicle, the lower your monthly payments will be set at.

3) Monthly Payments

Some people compare the price of monthly loan payments to that of monthly lease payments. Because lease payments tend to be lower, some consumers move towards this option. This is not always the way to go; leasing a car presents a set of restrictions for a car owner that you may not want to deal with. This may include monthly and yearly mileage limitations.

The monthly payments associated with the financing of a car involve the entire purchase price of an automobile. You will also be paying interest on the loan, as well as additional taxes, finance charges and fees. But, in the end, you will possess your own car, whereas leasing is similar to renting the use of a vehicle. If you are able to oblige, lower monthly payments can be achieved by placing a higher down payment on your car.

4) Rebates and Incentives

When financing a new car, there are a few instances that may provide lower monthly payments or a lower overall purchase price. This can be seen when someone offers to trade in his or her old car towards a lower price regarding the financing of a new car. Sometimes, this move is advantageous to a consumer, especially if they have a decent vehicle in their possession.

There are also incentives that attract consumers to purchasing a new car. This may include anything from a $1500 bonus, or no payments owed for a short period of time. Keep in mind that there are all sorts of gimmicks that car dealerships will use to bring in the business. It is the responsibility of the consumer to weed out the faulty offers and pay attention to the fine print.

5) Convenience vs. Lower Financing Rates

If you are on a budget, you should seek financing from a credit union or bank. More times than not, they will offer lower financing rates. This means undergoing a meeting and evaluation with a financial representative. Paperwork is involved and clear communication with bank or finance company employees is a must. Some people would rather pay the extra price for turning to a car dealer because they handle all of the tedious details of a car transaction. They deal with the purchase price, financing, as well as handle car trade-ins. This route will cost more than going to the bank yourself.

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