Auto Loan Basics
Things to consider when buying a new or used car
According to the Colorado Automobile Dealers Association, new car sales in May were up 16 percent in Colorado alone. Around the country, sales were up 22 percent year over year in June 2012. This means that more consumers are out there securing auto loans. If you're in the market for a new car and a new loan, start with the basics.
Credit score is king
Many dealers boast about their low-interest auto loan rates. However, the interest rate they advertise is not the only interest rate available. The lowest rates go to individuals with the highest credit scores. There are higher rates available for individuals with lower credit scores. Before you start shopping for a vehicle, check your credit report and get an idea of the interest rate you might qualify for. Then decide if it's worth it to wait and work on increasing your credit score before you get that loan.
You can shop around for a loan
It's unfortunate that so many individuals secure auto loan financing only once they've reached the dealer's hot seat. Consumers have the power to shop around for auto loan options through their financial institutions. In doing so, you could find one that has a much better interest rate than your local car dealer's.
Rebates might not be such a good idea
Often consumers are asked to choose between an impressive cash rebate on the new car purchase and a low interest rate on the loan. Unfortunately, selecting the rebate over the lower interest rate could result in more money spent on the vehicle.
Instead of jumping at the cash incentive, use an online calculator to figure out just how much that extra interest will cost you, and if you see that it's more than the actual rebate amount, go for the lower interest.
Make a down payment
No matter how low your APR is, it represents extra money that you should ultimately try to minimize. By making a significant down payment on your vehicle, you can reduce the amount of overall interest you spend on your auto loan. While trade-ins can be valuable, in some cases it is better to privately sell your existing vehicle for more than the trade-in value and use that money as a down payment.
When you're ready to start shopping for your new car, shop for your new car's loan first. By securing the loan independently, you can take the time to find the best rate and get a better idea of your actual car payment and how it fits into your budget. Give us a call or stop by to see the financing options we have available.
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