Tips for Financing an Auto Loan
When buying a new or used car, most people take out a loan instead of paying cash for the vehicle. However, if you’re not prepared before you go shopping for your new Toyota, you might be caught off guard and end up making a bad decision about the loan. As a result, you might end up with a larger loan than what you originally wanted, which could cause financial problems for you later. It’s always best to have a plan before you begin shopping for that new car and the following tips can help.
Decide How Much You’re Willing to Borrow When Financing an Auto Loan
The first thing you need to do is set a limit for the loan amount. Go over your finances and determine how much you can borrow without putting yourself in a financial bind. This figure should include finance charges not just the amount borrowed to be accurate. Setting this limit will help keep you from overextending your funds and give you a guideline for how much you can afford to put on your new or used Toyota purchase.
Determine How Long You’re Willing to Pay on the Loan
Based on the amount of the loan, the financial company will determine the length of the loan but in most cases, it’s negotiable. You can pay the loan off in a shorter period or ask for a longer loan agreement. Extending your loan for a longer period will lower your monthly payments but it will increase your financial costs, so the length of your loan deserves careful thought.
Choose Your Own Finance Company
When you buy a new or used Toyota from a dealership, they will submit your application to the various financial companies they deal with to look for the one that offers the best rates for your auto loan. Here at South Dade Toyota, you can even use our online car loan calculator to get an instant car loan rate, before submitting a financial application.
However, you do have other choices. You can take out a loan with the bank you do business with or choose some other financial institution. This gives you the chance to shop around for the best rates yourself.
Once you find the company you want to use, you can get your loan pre-approved. That will speed up things quite a bit and make buying your new vehicle go even smoother. However, you will have a limited time to take advantage of the pre-approval, so make sure you’re ready to buy a vehicle before you go through the process.
Ask the Right Questions
When you talk to financial representatives, you should ask a series of questions to make sure you fully understand the terms of the agreement.
Below are a few of the most important questions to ask when financing an auto loan:
- What is the annual percentage rate (APR) you will pay?
- How much are your monthly payments?
- Are there any penalties you should be aware of?
- How many payments will you be making?
- How much is the actual loan and how much is the finance charges?
- What does the credit insurance cover and how much does it cost?
If at any time you don’t understand something or the answer to your question doesn’t make sense, be persistent until you completely understand. Once you take care of all the details, it’s time to finalize the deal, get pre-approved and go shopping for that new Toyota.