You have various options to choose from and decisions to make if you finance your next vehicle purchase. Although the bank chooses your rate, you can plan your finances better by asking the right questions, which can ultimately help you determine where to apply. Find a lender who complements your lending needs and future financial plans.
How Much Will My Interest Rate Be?
Your interest rate can cost you significant money over the term of you loan. To determine current interest rates, call or check bank websites. Most are advertised online but are usually for new-car loans, so call to be sure. Consider applying for a pre-approval at a bank with competitive interest rates so you know if you qualify for the best rates. Vehicle manufacturers offer low rates for new-car financing, which you can view at manufacturer and dealer websites.
Can I Pay Off My Loan Early?
Most banks allow you to pay off your loan early. You can eliminate interest charges this way. If you're expecting cash in the near future, ask potential lenders to if you are required to have the loan open for a number of months before paying it off. Even if you don't have the means to pay off the loan entirely, you can send in additional payments to shorten the loan term. Find out if any fees apply for satisfying the loan early, which is unfavorable.
How Much Will My Payment Be?
Your payment is based on your interest rate and term. If you have a pre-approval, you can speak to a loan or dealer representative to find your exact payment based on your qualifying interest rate. Otherwise, use an online auto loan calculator to determine differences in payment by changing the term and rates, money down or vehicle sales price (see Resources). Include your sales tax and other fees in your calculations.
What are the Term Options?
Most banks offer a 24-month to 84-month loan option, although some banks may offer a longer term. Rates increase over 60 months. Some banks do not lend for 84 months or more unless you apply for a large loan. For example, you may have to borrow at least $30,000 to qualify. Whichever you choose, try to keep your vehicle's value in line with your payments. A 72-month loan for a four-year-old vehicle is not beneficial; you'll have a hard time selling or trading your car in the future.
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