Finding and paying for a used vehicle involves more than just visiting the dealership lot and driving away. You'll want to research the vehicle make and model and consider reliability. Before purchasing a used vehicle, you should also review the car’s maintenance record and upkeep, according to the Federal Trade Commission's website.
Part of your research should include determining what loan amount fits your budget and exploring financing options to pay for it. Auto loans can be financed through banks, credit unions and non-bank automobile manufacturer financing units, often provided through an automotive dealership.
Typically, financing is an installment loan ranging from two to seven years. If you have cash on hand as a down payment to pay for part of the sale price, that will lower the total financed amount, lowering the monthly payments.
Over the repayment term you’ll pay off the original loan, known as principal, as well as the interest, which is a percentage of the principal, every month. Use an online calculator to gauge the potential costs of a loan based on the interest rate and length of the loan. Running the numbers can serve as a reality check on what’s within your budget, and how the payments change with different term lengths and interest rates.
Also keep in mind that your credit score is an important factor in determining the interest rate you receive. Generally speaking, a lower credit score results in a higher interest rate. Ideally, you should know your credit score before beginning the financing process to make sure you receive the best interest rate you can qualify for.
Auto loans can be a fixed rate, which means the payment is the same for the life of the loan. Your interest rate and the length of your loan impact the affordability of your monthly payments, your interest rate and your term length.
When financing a used car, be sure to understand the entire cost and duration of the loan and the loan process in addition to evaluating the vehicle’s value and maintenance costs.
Article is adapted from content provided by DTS.
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