Buying an automobile is a very exciting thing to do. Even if you are not a real car buff it can be a fun time until you get to he part about financing your purchase. Getting an auto loan can be stressful and confusing. In this article we will look at a couple of things you should keep in mind if you decide to finance your new car.
The first thing you want to consider is the length of the loan. Do you want to have a sixty month, or longer loan, or do you you want to pay it off now. If you do financing for sixty months, or longer, you will pay more in interest to the lender.
If you pay off your loan as soon as possible they will not be making as much interest. You want to choose an affordable payment, yet pay it off quicker if you can.
A lot of people will do sixty or seventy two month payments now because it is a lower interest rate and a lower monthly payment. Then they will pay double payments in months when they can to pay it off quicker.
If you should have bad credit the new or used car you buy will cost more in interest because you are going to pay a higher rate. So again, if you can pay it off sooner you will save more money.
Let’s look at this example of what interest can do to you and the total amount of money your car will end up costing you.
– You buy a car for thirty thousand dollars
– Your payments are $450 a month for 84 months
– Your total payments would be $37,800
– You will have paid over $7,000 in interest on your auto loan.
You have to be very careful when buying a car because with that comes the car loan, and you have to know which kind of a loan will go best for you. Just because they offer a low rate to get you into the showroom does not mean that is the rate you will get. For many people the interest rate will end up higher when it is time to sign the papers.
In summary there is more to buying a car than the make and model. Your auto loan will play a big role in determining what you can afford. It can also affect your financial future.
You want to negotiate the best deal up front when you have some leverage as a new buyer. Your current credit situation will partly determine the interest rate of your auto loan which in turn will affect you payment.