If you have never really looked into the world of car financing before, there are a number of different factors to consider. In today’s car-buying marketplace, people are generally very dependent on car loans, and if you are not well-informed about the terms and conditions of what you are signing up for, this is certainly not a good position to be in. So, to simplify the issue, here are just a few of the top things to consider before signing up for a car loan.
How Much to Put Down
‘No money down’ is a popular piece of sales jargon, but is this really something that will serve you well in the long-run? If you build a savings account and put down a significant down payment, you will be able to grab yourself a much better deal. Check out this auto loan calculator to give yourself an overview of the different financing options. It is a commonly known fact that new cars depreciate massively the second they are driven off the lot, and if you don’t make a down payment, you will probably owe more than the car is worth, to begin with!
Length of Term
It certainly seems like auto loan terms are continuing to get longer and longer. While this means lower monthly repayments, it also means added interest costs. So, you should watch out for these – particularly if you are buying a used car which is likely to have a shorter useful life. The last thing that you want to happen is for the loan to outlive the car.
Car interest rates can vary wildly, so make sure that you take the time to compare lenders before you set out a loan offer. Rates tend to be higher on longer loans, so this is another tick in the box of choosing a shorter loan.
Deferred Payment Costs
If you are offered a deal which involves making no payments for an extended period of time, this is one which you should be very wary of. This does not necessarily mean that you have free use of your new car for that amount of time. Often, it is written into the contract that you will accrue interest during this period, so you will end up paying more on the full balance in the long-run.
Early Payment Fees
Before you sign on the dotted line to receive your car loan, make sure that you inspect the contract closely to check for any fees which may apply if the loan is repaid early. If you want to trade in the car for a different model, you will have to pay off the existing loan early.
There is no doubt that getting a car loan is an appealing option for many people, but you need to make sure that you are getting a deal which is right for you. Remember, you always need to take the time to read the small print.