One of the most important considerations when purchasing a vehicle is figuring out how you’re going to finance it. Today, there are more options to finance than ever before, and dealerships are committed to finding you the best option for you and your budget. Curious to learn more? Here are some frequently asked questions about financing a car.
What factors into an auto loan?
To determine your loan, lenders consider multiple variables. Some important ones are the cost of the car, interest rate, length of the car loan, credit score, down payment, and whether you’re buying a new or used vehicle.
What does my credit score have to do with it?
In general, your credit score indicates how reliable you are at paying back your debts. Credit scores take into account things like your credit history (including if you make payments on time), how many lines of credit you have open, and what your total debt amount is.
When it comes to auto loans, lenders check your credit score to determine your loan details. For instance, if you have a stellar credit score, you may get a low interest rate.
Should I save for a down payment?
This depends on what your current needs are. If you can wait a couple months and save up to make a larger down payment on your vehicle, you’ll likely have a lower monthly payment for the length of the loan. However, if you need a vehicle as soon as possible and don’t have a large down payment, you’ll still be able to get a car you want in your budget.
What’s an interest rate or APR?
An interest rate is, essentially, the percentage of the loan you pay as a borrower for borrowing the money. APR stands for annual percentage rate, which is the yearly interest rate that you will pay on your auto loan.
How large of an auto loan is affordable?
When deciding which vehicle to buy, it’s important to set a budget. Since cars are so important in Americans’ daily lives, many drivers are willing to spend up to 20 percent of their monthly income on their car payment. Spend some time calculating your budget and determining a reasonable monthly payment.
For more information about financing your next ride, contact us at Terry Reid Mitsubishi.