All About Car Loans - How To Video - NewCars.com

Summary

This video provides essential tips on securing the best auto financing for your dream car. It emphasizes the importance of knowing your budget, including the down payment and monthly payments, while considering your credit score, which influences the interest rate. Pre-approval for an auto loan gives you negotiation power, and the video advises on comparing loan terms to find the best deal. Shorter loan terms save you money in the long run. It also briefly discusses leasing as an option. With these strategies, financing a car can be a manageable and cost-effective process.

Takeaways

• 😀 Before financing a car, determine how much you're willing and able to spend, including your down payment and monthly payments.
• 😀 A larger down payment will result in a smaller loan amount, leading to lower monthly payments and less interest.
• 😀 Financial experts recommend spending no more than 20% of your monthly income on car payments to avoid financial strain.
• 😀 Your credit score significantly impacts your interest rate. The higher the score, the better the rate you’ll qualify for.
• 😀 If your credit score is low, expect a higher interest rate, but being aware of this upfront will help you manage expectations.
• 😀 Always check your credit score before shopping for auto financing to understand what rates you might qualify for.
• 😀 Get pre-approved for an auto loan before negotiating with dealerships so you have leverage when comparing rates.
• 😀 Shopping for auto loans from various lenders, including banks and credit unions, ensures you get the best deal on your financing.
• 😀 Shorter loan terms mean higher monthly payments, but you’ll pay less interest overall and finish paying off the loan sooner.
• 😀 When negotiating, avoid answering questions about monthly payments directly. Instead, focus on your down payment and ask for available rates and terms.
• 😀 If you plan on keeping the car for a short period or want lower monthly payments, consider leasing instead of buying.

Q & A

What is the first thing I should consider when looking for auto financing?

The first thing to consider is how much you are willing and able to spend on the new car, including your down payment and how much you can afford to pay monthly.

How does a larger down payment affect my loan?

A larger down payment will reduce your loan amount, resulting in lower monthly payments, less interest, and overall savings.

What percentage of my income should I ideally spend on car payments each month?

Financial experts recommend that you should not spend more than 20% of your monthly income on car payments.

Why is it important to check my credit score before applying for a car loan?

Knowing your credit score helps you understand the interest rates you might qualify for and avoid surprises when shopping for a loan.

How does my credit score affect the interest rate on my loan?

The higher your credit score, the lower your interest rate will be. A lower interest rate means lower monthly payments and overall savings.

What if I have a low credit score? Will I still be able to get an auto loan?

If you have a low credit score, you may be offered a higher interest rate, but it's important to understand this in advance so you can plan accordingly and find affordable options.

What is the benefit of getting pre-approved for an auto loan?

Getting pre-approved gives you leverage when negotiating at the dealership, allowing you to compare rates and ensure you’re getting the best deal.

How does the term length of a loan affect my payments?

A shorter term length results in larger monthly payments but saves you money in the long run due to lower interest costs and fewer total payments.

What should I do if a dealer asks me for my desired monthly payment?

Avoid answering the question. Instead, provide your down payment amount and ask for the interest rates and terms they offer. Compare these with your pre-approved loan options.

Is leasing a good option for everyone?

Leasing can be a good option if you prefer smaller monthly payments or don’t plan to keep the car long-term, but it may not be ideal if you want to own the car outright.

Where can I find more information about auto financing and new car buying?

For more detailed advice on auto financing, visit the 'how to' section at newcars.com, which offers comprehensive guides and resources.