Cars tend to last for years upon years which means things have likely changed since the last time you’ve been in the market. Fortunately, we have some answers to common financing questions that will help guide you through your next vehicular purchase.
Q: What is my credit score used for?
A: Your credit score is a general summary of how reliable of a borrower you are. Lenders use your credit score to determine the level of risk they take when offering you a loan. Make no mistake: your credit score is tied to the annual percentage rate (APR) attached to your loan. High credit scores will enjoy lower rates and vice versa.
Q: What factors should I consider when purchasing a vehicle?
A: There are several key factors to consider when you’re in the market for your next vehicle.
First, consider the cost of the car. Buying a car you can’t afford generally means you’ll lose any money you put into it fairly quickly. If you want a nicer car for less money, consider leasing instead of buying.
The next factor to consider is how the interest rate will affect the loan over the course of the contract. Shop around to find the best rate available to you.
The length of the car loan goes hand-in-hand with the interest rate. A longer loan term usually means that you’ll pay more in interest too.
Can you make a sizable down payment? Doing so will help reduce the monthly payment and could push the price into your budget.
Q: How much car can I afford?
A: As a general rule, your monthly car payment shouldn’t amount to more than 20 percent of your monthly income. Make sure to set your budget before you head to the dealership hunting for your next vehicle. Determine what expenses you can cut down on in order to increase the range of vehicles available to you.