Facts You Should Know About Auto Loan Rates

It is important to take time to conduct research when you are going to purchase a new vehicle. If you are financially savvy, then you are aware that getting a great price is the natural objective. In order to assess the cost effectiveness of buying that new vehicle and to decide on the monthly premium that you can afford, it is helpful to know that the interest rate will be the most important factor.

Financial Institutions

Most financial institutions will charge you an interest rate on all auto loans. It is just the way that they do business to earn a profit. You may have to conduct your own research to know which finance company offers the lowest interest rate, after which you would ask for a quote. Remember that your rate of interest will determine the amount in payment that you make monthly as long as the loan last. While you might be aware of the advantages of being offered a low rate of interest, there are still some things that you may not know about how to find the best auto loan.

Zero Percent Interest Rate

You may think that getting a zero percent interest rate is the best deal, but it may not be. If you put in an application for a new auto loan and you have good credit, yes, you may be eligible for a zero percent rate of interest. Of course, you would take up the offer to buy a car with financing at zero percent interest. Who wouldn’t? Some auto manufacturers offer their own factory rebates. Usually, you would either choose the factory rebate or the zero percent interest. You may choose the latter as the better offer, but if you were to choose the factory rebate instead and pay a decent rate, skipping the zero percent offer, you probably would enjoy more savings after deducting the rebate from the car’s sales price.

Are Used Cars Cheaper?

You may think that used cars are cheaper and easier to afford the monthly car payments. However, did you know that the interest rates on new cars may be lower than on used cars? Yes, the price for the new car will be higher, but you will have a vehicle in good working condition for a considerable amount of time. You could drive the used vehicle off the lot and have mechanical problems in no time. And you would still have to make the monthly payments.

Saving Money

A new car will depreciate during the first year of purchase, but that does not mean that you have to shy away from buying one. If you buy a new car and get a lower interest rate because of your good credit, ask the finance officer for a short term loan. You will enjoy more savings by paying off the car earlier. For example, if you bought a car for $15,000 with a term of 72 months, you would probably pay an interest rate of 5.75%. If you were to ask for a reduction in terms for 60 months instead, your interest rate would be reduced by a whole percentage point and that is savings of almost $40 per month.

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