It does not matter if you are buying a new or used vehicle, you have two options when it comes to finalizing the transaction. Make the purchase in full with cash, or opt for a car loan that you can payoff over the course of time.
While some are able to make a cash purchase, most find themselves comparing car loans in an attempt to get the best possible deal.
You can do a lot of work on your own before visiting a dealer. Even if you rely on the dealer’s finance department to secure a loan on your behalf, there are questions you must answer.
1. What is the best rate you qualify for? The lower the interest rate the lower the monthly payment. Make sure you compare rates from at least three lenders, as this will give you a clear idea of which one is offering the best deal.
Tip: if you don’t think a dealer is getting you the best deal, in terms of the rate, shop around on your own. You may find that your suspicions are true.
2. What is the term of the loan? From 12 months to 84 months, you have a variety of options. The shorter the term the higher your payment. At the same time, a shorter term allows you to payoff the loan in a quicker period of time.
3. Is there a prepayment penalty? Just because you have a 60 month car loan, for example, does not mean you have to wait this long to pay it off. That said, you want to know if you will be charged a penalty to payoff the loan early.
As you search for the best car loan, let your answers to these three questions guide you in the right direction.
