When it’s time to purchase a new vehicle, most people pay with a car loan. It’s one of the largest – and most important – purchases a person can make. Car loans sound simple; you borrow money for your car and pay it back over time along with interest. However, there’s more to consider than the basics when it comes time to finance a new or used vehicle. Keep reading to learn about which factors impact your auto loan the most.
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There are typically several factors that play into the amount of money you’ll pay with an auto loan.
Down Payment
Many car buyers have some cash on hand to put toward their purchase, but not the total amount. A down payment can help lower your monthly payment or the amount of time you’ll be paying off a loan.
Trade
Trading in a vehicle impacts a car loan in a similar way as making a down payment. Instead of cash, you can trade in your used vehicle. The dealership will put the value of your trade toward the purchase of your new vehicle, lowering the amount that you owe.
Annual Percentage Rate (APR)
The APR is the amount you pay each year toward a vehicle including all interest and fees. Essentially, it’s the yearly cost of the loan. APR is different from your interest rate. It represents the big picture of the cost of borrowing money for your vehicle purchase.
Loan Term
The length of your loan will determine how much you’re paying monthly and for how long. Short-term loans will give you a higher monthly payment with less time to pay off the loan, but you’ll pay less in interest overall. A longer term loan equates to a smaller monthly payment with more interest paid over the length of the term.
All these components come together to affect your monthly payment towards an auto loan. No two loans are the same. Credit score can be a factor in determining interest rates and loan approval, and other monthly expenses can contribute to the terms of the loan you choose.
Finance Your Next Vehicle at Carnamic
At Carnamic, we strive to make the auto loan process as simple and stress-free as possible. You can get pre-approved right here on our website, a view of your monthly payment, and hassle-free shopping when you choose Carnamic. Contact us today to learn more about our financing options and to find your dream car at one of our many Bay Area locations.
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