Guide to Choosing Car Dealer Finance Your work is done when you have clinched a great car offer at a dealership, right? No, this is not the case. Sometimes the financing portion of the purchase is more difficult than the negotiating part. This is especially the case if you are not well prepared. Continue reading for some tips you should follow to make the car finance process easy. So, what do you need to know about auto loans? Some of these include: The Interest Rate The interest rate charged on the loan will determine how much monthly payment you will make. If the dealer charges you a low rate, your monthly installments are bound to be low too.
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There are several factors that determine what rate you’ll receive on your loan. One of the factors, which you should be aware of, is your credit score. Before starting to shop for a care, get a copy of your credit report. You can know whether or not you are charged a fair interest rate based on your credit score.
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Life of the Loan The term of the loan is the other important thing you should consider. Just about a decade ago, majority of loans were given for between 1.5 and 2 years. However, with new, more expensive cars in the market, dealers are offering long term car loans. The average loan today is between 60 and 72 months – a big jump from 10 years ago. There are even dealerships that are offering long term loans extending to 8 years. When you know about car financing, it will not be easy for a dealer to take advantage of you. The interest rate that the dealer should charge you should be in line with your credit score. Also make sure to finance your car for a reasonable period of time. Generally, you should avoid car loans whose terms stretch to over five years. If you are applying for a car loan with a term of 8 years, this definitely means you cannot afford the car. There are many cheap vehicles you can buy with short term loans than the one you wish to buy for a long term loan. Sometimes, the salesperson will ask you, “how much would you like to pay for this car?” When you hear this question, know that it’s a trap. When you indicate the payment that you will be comfortable with, the salesmen will have a ground on which to start profiting from you. You can end up in a deal where you don’t know how much you are truly buying the car for, how much interest you are charged and what is the term of the loan. While it is important to know how much you can afford, do not be quick to get into a deal before you have done your research.