Buying a new car can be an exciting experience, but when it comes to financing it, many people are confused. If you are financing a new car, you need to make sure that you understand the terms of the agreement. Asking the right questions can go a long way towards making things clear.
What is the Length of the Loan?
When you are getting an auto loan, you need to ask exactly how long the term of the loan is. Dealers will often try to play with the term of the loan to get you a payment that you can afford. If they hear you talk about a payment that you want to try to get, they may extend the term so that your payment can be more affordable. Ideally, you should look for a shorter term, such as four or five years.
How Much Am I Paying to Finance?
During this process, you should also find out exactly how much money you are paying so that you can finance the purchase of your car. Ask the lender what the exact annual percentage rate is on your loan. Then ask what the total cost of the financing is for the life of the loan. You will most likely spend thousands of dollars over the course of your loan on finance charges and you need to understand the total amount upfront.
Who is the Lender?
When you work with a dealer, you will usually obtain financing from an outside source with the help of the dealer's finance department. The dealer may go ahead and give you the car and finalize the paperwork without actually having a deal in place. Then, after you have a car, they may call you and tell you that they could not get you financed. Before you leave with the car, find out exactly who the lender is and whether it is a final sale.
Does This Include Gap Insurance?
When buying a new car, it is generally a good idea to purchase gap insurance as well. This is a type of insurance coverage that covers the gap between what you owe and what the car is worth if you are in an accident. This could be a considerable difference because cars depreciate quickly. Gap insurance is offered by the lender and it will usually only be a few extra dollars per month added to your payment.
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