When you buy a car with a loan, you not only pay back the amount borrowed but you also pay finance charges (interest). Each month’s loan payment consists partly of principle and partly of interest. Actually, the amount of principle and interest changes each month, although the total remains the same. In the beginning, you pay more interest and less principle. Near the end of the loan, you are paying nearly all principle.
The amount of finance charges you pay depends on the interest rate and the length (term) of your loan. Interest rates can vary between different lenders. The interest rate you pay also depends on your credit score. Someone with poor credit will pay a higher rate than someone with outstanding credit. More about credit later.
Interest rates are generally higher for used cars than for new cars. And longer loan terms have higher interest rates than shorter loans.
At the time of this writing the national average new-car interest rate is about 3.0% for a 4-year car loan and a bit higher for used car loans. Dealers sometimes add a percentage point or two for additional profit. This is called “reserve.”
Continue reading Auto Loan Rates – How to Get the Best Rates
For many people, an auto loan is the most significant and largest financial transaction they make in their lives — at least until they get a home mortgage. Because it is so significant, it makes sense to take the right steps and avoid mistakes in the process.
1. First, shop around for auto loans at your local banks, credit unions, and financial companies. You don’t have to finance through your car dealer. In fact, by shopping around first, you’ll know if your dealer’s loan offer is good or not. When you talk to a bank or credit union, you may also be able to get pre-approved at a guaranteed interest rate and for a given amount. That way, you’ll know what price car you can afford when you go to your dealer. You are not obligated to accept any loan offer you receive, even those for which you are pre-approved.
2. Know your credit score. Your credit can make the difference between getting approved for a car loan or not. If you are approved, your credit score will determine the interest rate you pay and the down payment amount you’ll have to make. Car companies offer special promotional deals each month, such as 0% APR loans and low-payment leases, which require good credit. To get the best rates and best deals you’ll need a credit score of 700 or above. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!
Continue reading 5 Tips for Getting an Auto Loan
Car manufacturers are constantly offering low-interest loans and other incentives to help sell cars.
With “normal” interest rates around 3.0% at the time of this writing, it’s not much of a stretch for car companies to offer 1.9%, 0.9%, or even 0% loan rates.
A zero-percent (0%) loan means no interest at all — no finance charges for the life of the loan. Some car company deals limit no-interest loans to 36 months but some extend it all the way to 60 or even 72 months.
Understand that no-interest loans are not something you can get by negotiating with a dealer. These promotional loan deals are only offered by car manufacturers on selected models and styles for a limited amount of time.
How much money do you save with a 0% loan?
Continue reading 0% Car Loans – Zero Interest
Car manufacturers offer special sales incentives every month on particular vehicle makes, models, and styles. Incentives vary from month to month.
Incentives come in the form of direct-to-customer rebates, special lease deals, and low-interest loans, including 0% APR loan deals. See Best Car Deals for current new-car incentives, including 0% loans.
Zero percent financing, when offered, means that the customer pays no interest or finance charges on his car loan. This saves money. Monthly payments are smaller and total costs are reduced.
Calculating payments for a zero percent loan is easy. Simply divide the cost of the car by the number of months in the loan. Non-zero-percent loans are much more difficult to calculate and require a car loan calculator.
Are 0% loans good deals?
Continue reading Where to Find 0% APR Car Deals