Sometimes, dealerships offer you the option between a rebate and a 0 percent loan (often for a specific loan term). Typically, the dealership applies the rebate toward the down payment, but sometimes it reduces the actual price of the car, which will also save you money in taxes. GOOD TO KNOW:Īn auto loan rebate reduces the purchase price of the vehicle by hundreds or sometimes thousands of dollars. Shop around with three to five lenders, such as credit unions, banks, and automakers. Just as comparing quotes from different auto insurance providers will help you find the lowest rates, comparing loans from different lenders can help you find the best loan. If your monthly payments for a particular vehicle are too high for a loan term in that range, consider a less expensive vehicle. Longer than that, and you could end up with negative equity (owing more on the car than it’s worth). Financial experts recommend loan terms of no more than 48 to 60 months for new cars, and 36 to 48 months for used cars. Opt for the shortest loan length whose monthly payments fit comfortably in your budget. The shorter your loan term is, the higher your monthly payments will be - but the less you’ll pay in interest overall. Check out our Auto Refinance Calculator to get a better sense of whether refinancing is worth it. If your credit has improved, explore this option to lower your monthly payment and/or pay less interest overall. Refinancing your current loan can be a great option to save money while keeping your vehicle. Consider Refinancing Your Current Car Loan If you’re not sure how much you can afford, our Car Affordability Calculator can help. Factor in expenses such as taxes, title fees, and future vehicle maintenance when calculating vehicle cost. The final price you pay will be higher than the sticker on the car window. We recommend at least 20 percent, but even 10 percent can make a difference in lowering your interest payments. To reduce the total amount you have to finance, have a down payment saved up. When you put more down, you also lower the amount of total interest you’ll pay over the life of the loan.įor example, let’s say you’re purchasing a $20,000 vehicle at a 10 percent interest rate, with a 60-month loan term: If you’re trading in a vehicle, you can put its value toward the down payment. The higher your down payment, the lower your monthly auto loan payments. Brands known to hold their value over time, like Toyota or Honda, will depreciate less quickly than other vehicles, like luxury cars. In the long-term, it’s typically less expensive to own a used car, though it depends on the vehicle’s condition. for a used car loan is $569, which is 22 percent below the $733 average new car monthly payment. Even though used cars come with higher interest rates than new cars, the difference in vehicle price usually translates into lower monthly payments. Your monthly payments will likely be lower for a used than new car.
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