Financing a car may be a massive deal only if you do not do it the smart way.You are gonna lose a lot of bugs and you are most likely gonna find yourself going upside-down in your car.
Now, I bought my first car when I was 20 years old, and I was so stupid because I got a $20,000 loans for seven years at 17% interest.
So, please do not do what I did, because I didn't do any research, and I took really bad advice for my friends on how to grow my credit. And we all understand that bad advice can continuously cause extremely stupid decisions.
Now, I am going to begin by saying that financing a car is essentially broken into 3 totally different elements, but you've got to understand how these different parts work in order not to get screwed as the consumer.
We'll be looking at The Amount Borrowed, The Interest Rate and The Length Of The Loan.
Those are the 3 different elements that you just ought to know.
These 3 different numbers will determine what you can or cannot afford as a monthly car payment, so pay attention.
And simply keep in mind that a monthly payment does not determine what you can actually afford till you apply what I am talking about.
Now, starting with The Amount Borrowed.
This will be your entire car purchase, plus any taxes and fees, and any money that's left from a previous car loan.
It's basically everything you would like to borrow from the bank in order to buy your car.
Now, make sure to do the research on the car that you are buying, so that you can get the best deal possible.
And please don't pay full price for extended warranties or carpet cleaning, or anything like that, because those prices are all negotiable.
Just keep in mind to get the best value possible on your car purchase.
Now, as far as The Interest Rate goes this is just the amount of money that you have to pay back the bank in order to even have your car loan.
Now, in order to get the best interest rates, you have to own excellent credit, or you have to have a cosigner that has excellent credit in order to make it happen.
And if you're using a cosigner, make damn sure that you just can make your monthly payments every single month.
Because if you are late just once, you are gonna hurt their credit score.
And trust me, they are gonna be pretty pissed after they go in to get a loan, and they realize that you just screwed their credit score.
The bottom line here although is that if you do have bad credit simply stick to the cheap car, so that you can actually make the payments and build your credit along the way.
Or, you may pay cash and save up like we used to back within the day.
You'll additionally need to have a down payment of about ten to twenty percent to get the best rates.
And new cars will generally need about twenty percent down due to their fast depreciation.
I know that 20% down may be a lot, but you've got to understand that in order to get the best rates, you got to make a few sacrifices.
If you have got an existing car that you just can sell, just take those profits and use those towards your down payment, and you'll probably have enough.
Now, if you don't have very much down, you can at least see what the banks will give you because it's worth a try.
The best auto loan interest rates are usually about three to five percent which is able to price you about thirty to fifty greenbacks a year per thousand bucks that you just borrow.
So, if you're financing $20,000 then you're gonna be looking at about 600 to $1,000 a year in interest but that's on optimal credit and with a good down payment.
And, if you're given a rate that is more than 5%, then I might extremely recommend working on your credit score or paying cash for the car, so you don't go completely upside down on it.
Being upside down in your car means you owe more than the car is truly value which isn't a good thing.
Cars naturally depreciate on their own which completely sucks but it's normal.
But, simply keep in mind that you just don't need to be paying a lot in interest because you will go upside down in your car.
Now, when you plan to finance a car, I would stick with just banks and credit unions, because they always have the best rates.
Just go searching on-line and I am sure that you will find a bank extremely quick and easy.
And please do not go with your local bank just because you know who they're, because that doesn't always mean that they're gonna have the best rates.
Just always go with whomever has the best terms because that's gonna save you the most money on your car loan.
I live in Utah and that i really financed a car once through a corporation "Canada" because they had the best rates and it absolutely was simple to only pay on-line.
Dealers also can get you actually good rates on car loans.
But, simply check that they do not get a cut of the interest rates.
And if they don't seem to be taking a cut, and go ahead, and use them, because it's a lot easier.
And you probably solely have to get your credit for at once.
And sometimes automobile manufacturers can even offer their own rates which are usually excellent from about 2% to 0% on new car purchases.
So, if you are looking into a brand-new car, and that they offer 0% financing, and there is nothing funny about it, then that's a seriously good deal.
And finally let's cover The Length Of The Loan which is that the amount of time that you are gonna be making monthly payments till the loan is paid offed.
Just keep in mind. The longer the length of the loan, the smaller your car payments are going to be.
But, simply remember that the longer the loan is the more that you are gonna pay an interest.
And this is what you have to understand.
You have to know this because banks and dealers will simply increase the length of your loan in order to get your payments wherever you want them so you think you're getting a good deal.
The monthly payment is only important if you are following the 3 elements that I have been talking about.
Now, the length of the auto loan should only be about twenty-four to sixty months.
If you go along with something that is longer than the 60 months, you are gonna see the interest rates increase, and you are guaranteed to waste way too much money on your car.
Typically, the interest rates can go up about 1 to 2 points for every year you extend past sixty months. And that's also for the customers with the best credit score.
So, please do not do something higher than 5 years.
So, let's say that you buy a car for $15,000 at a 4% interest rate for 60 months.
Your monthly payment is gonna be about $276 a month for the next five years.
And you are gonna pay nearly sixteen hundred greenbacks in interest over the life of the loan.
Now, let's pretend that we purchase the same fifteen thousand dollar car.
But, this time you're gonna pay 8% interest over 84 months.
Your payments now gonna be $233 a month which is better than the 276, but this is all a lie, because you're gonna pay a ton more an interest.
You'll now be paying about $4639 in interest for the car loan.
And you'll be paying on that for the next seven years.
So, now can you see why having a longer loan is a bad idea.
It's all a big fat lie because your monthly payment might look good on paper, but it's actually a total rip off.
And after just a couple years, I guarantee you, you are gonna be upside down in your car.
And you'll still have 15 years to go on the loan.
Did you know that the average auto loan is sixty-eight months long at 4.2% interest for $30,000 borrowed?
Those are very scary numbers because it proves that almost all people are buying way too much car.
Now, I would like to make a quick note here about car insurance before you go out and purchase a car.
Please, call your auto insurance to find out how much the new car is gonna cost you.
Because if you are looking into some fancy 7 Series BMW and it costs you 150 bucks more a month in insurance and it's most likely worth looking into something else.
So, simply call your insurance before you purchase a car, so that you know how much more it's gonna cost.
And now, after all of this info, you know how to finance a car.
Just make sure to get the best price for the car, the best interest rate, and make sure that you are only keeping a loan for 24 – 60 months.
And, if you follow these 3 elements correctly, I guarantee you, you are gonna get the best financing possible for your car loan.
~oOo~
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