Car loans can be more complex than they seem on the surface, which is one reason it’s important to do your homework before car shopping. For instance, a lower monthly payment on your car often means that you’re spending more in the long run, and not all interest rates are designed to be equal. Finding the ideal car loan for you is key to saving money.
There are three basic components to a car loan: “loan amount,” “APR,” and “term.” You want the lowest loan amount possible, which you can either reduce by negotiating or making a larger down payment. The APR, or annual percentage rate, refers to the interest you pay on the principle (the loan amount) and fees. The lower the APR, the more you save. Finally, the loan term refers to how long you’ll pay off a car. Extending a term can significantly reduce your monthly payments, but it will cost you considerably more in interest.
Find the balance that works for you. Ideally, you want the lowest loan amount, rates, and loan terms, which often means choosing a car with a low sticker price. However, there isn’t one-size-fits-all way to get a car. If you want to spend a little more to get a new car or a luxury vehicle, just be sure to consider the added expense of extending a loan term or raising the APR.
If you have any questions about a car loan, swing by EZ way Auto Sales or give us a call. We’re ready and waiting to help.