Auto Loans and Loan Payments

When you purchase a car you usually have several options for paying.  One option is to pay cash for it, and that is always sweet.  However, if the money you are going to use to pay for the car is well invested and making a good return, you might want to compare the after-tax return on that investment to see if it would be cheaper to borrow that amount.  If you aren’t sure ask someone super smart, like your accountant, or your dad, or your daughter.

The second way is to get a car loan.  Although you can obtain an auto loan through the dealership, a direct auto loan from a bank or finance company often has better terms and interest rates.  This can be especially true if the bank car loan rates are combined with a manufacturer’s rebate that may be used instead of manufacturer financing through a dealership.

Many people like the convenience of getting a loan through the dealership, but these are not always in the car buyer’s best interest.  In addition, it is always beneficial to know what the best market auto loan rates are before talking to the dealer financing people.  Take out a loan from a bank to finance your car.  Comparing bank loans and car loan rates has never been easier with web sites like this one, www.selectautorates.com.  And filling out a credit application with the banks and lenders on the website is equally as convenient.  Often the auto loan applications can be approved or preapproved in minutes, making direct bank car loans a convenient choice.

Once the choice to purchase the car with a new auto loan has been made, you will probably be asked how quickly you want to pay off your new car.  Most auto loans are from three to five years or 36 to 60 monthly payments.  Different lengths of time can be arranged including a six year auto loan term, if desired.  Obviously, the longer you take to pay off the loan, the lower the payments will be, but then that pesky payment is around seemingly forever.  In addition, the amount of your monthly payment will depend on the interest rate and the amount of your down payment.  Keep in mind that the interest rates are generally higher on the longer term car loans. 

And don’t forget the bank or finance company will urge you to make a large down payment.  It’s like a tug of war over your cash, so hold on tight and get the best deal you can get given your needs and circumstances.  The benefit of comparing auto loan rates and terms on one website has real value because of the ease in which a consumer can quickly evaluate the various auto loan rates, terms and down payments required.

The size of your monthly car loan payment depends on the loan amount and loan terms.  The auto loan rate and the length of the auto loan can be determined by investigating the car loan offers at www.selectautorates.com.  The interest rate on the car loan will depend on many factors.  The starting point is the average auto loan rates that are being offered by banks, which is calculated weekly on www.selectautorates.com.   How much the auto loan rate will be, whether it is more or less than the average depends on a few things.  If you have sterling credit, you might get a competitive interest rate and be eligible for special programs that lower your cost.  However, if you have bad credit, or no credit, the banks might charge a much higher interest rate for taking what is perceived as a risk on loaning you money.

To calculate your loan amount you will first need to deicde on the car to be purchased and the estimated price of this car.  Once the car to be purchased is chosen, subtract the net trade-in value of your current auto and any down payment from the purchase price.  If you receive a rebate, subtract that amount from the purchase price too.  A rebate is a financial incentive that is offered by an auto dealer or maker to encourage vehicle sales.  Rebates often run as high as $500 or $1,000 on the price of a new auto.

For example, assume the purchase price of the vehicle is $20,000, including fees and taxes.  The dealer gives you $5,000 on your trade-in vehicle and offers a $500 rebate.  Your lender requires you to make a down payment of $1,000.  Since you owe $2,000 on your current vehicle, the net trade-in value is $3,000.  If you subtract $3,000, $1,000 and $500 from the $20,000 purchase price, your loan amount is $15,500.  From that number you can figure out the monthly payment, and both of those numbers are important!

While you are paying off the balance you owe on your car, the lending institution will hold the car’s title, so while it’s your car, the bank will have a lien representing their loan until the last cent comes rolling in.  Once all the payments are made, the car’s title is sent to you and you finally have complete free and clear ownership of the car.

Tags: auto loan rates, auto loans, car loan payments, car loans

This entry was posted on Thursday, February 19th, 2009 at 6:52 pm and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.