Auto Financing 101 in Forsyth, IL
It can be stressful to find an auto finance agreement that meets your needs which is why our team at Bob Brady Buick GMC has created a guide for understanding the auto financing world. These tips can help you when purchasing a vehicle, so keep reading to learn more.
What Is Auto Financing and How Does It Work?
It is known as auto financing when you borrow money from a credit union, lender, or bank to pay it back with interest. An auto loan has three elements – conditions, loan terms, and interest rates.
- Conditions: The borrower agrees upon a guideline, and if they default on the loan, they could face penalties.
- Loan Terms: How long the borrower has to pay back the borrowed money to the lender.
- Interest Rates: The cost of borrowing money as a percentage.
Types of Auto Financing
- Lease Financing: When you lease a vehicle, you agree to a set term, and at the end of the lease, you can choose to buy the vehicle, return it, or start a new lease. However, you do not own the vehicle, so think of it as renting a vehicle.
- First-Time Car Buyers: This loan is ideal for first-time car buyers as it offers benefits such as reduced down payments, waived application fees, and lower interest rates.
- Unsecured Auto Loans: This loan uses your credit score to determine the interest rates you are eligible for, typically used by buyers with lower credit scores.
- Secured Auto Loan: Your vehicle is used as collateral, and if you default on the loan or fail to make a payment, the lender can repossess your vehicle.
- Auto Refinance: Refinancing a car loan means replacing your current loan with a new one. This is often done by people whose credit score has improved.
Factors that Affect Auto Loan Rates
There are several factors that can affect your auto loan, such as:
- Down Payment: The size of your down payment can impact your interest rates.
- Loan Term: Agreeing to a shorter loan term means lower interest rates but higher monthly payments. However, you’ll save money in the long run compared to longer terms.
- Credit Score: You’ll receive lower interest rates if you have a higher credit score.
- Age of the Vehicle: Newer vehicles typically have lower interest rates due to lower risk than older vehicles.
How To Compare Auto Loan Rates?
When looking for an auto loan, contact multiple lenders and compare rates and terms to find the best fit for your needs. Don’t forget to review the annual percentage rate (APR), which includes other loan costs and interest rates.
How To Determine Your Monthly Budget?
You should spend no more than 15% of your monthly income on transportation, including car payments and insurance.
First, calculate your monthly net income (take-home pay after taxes and health insurance) so you can determine how much car you can afford. Then, make a shortlist of cars you’re interested in and estimate the fuel cost and insurance for each one. Finally, subtract these costs from your monthly income to determine how much you can afford.
You can contact your desired insurance company to obtain an insurance quote.
How to calculate estimate fuel expenses:
- Multiply your average daily commute distance by 30.
- Divide the given number by the mileage of your selected vehicle.
- Multiply the number by the current price per gallon and add one dollar to account for fluctuations.
How to Apply For Financing at Bob Brady Buick GMC?
Bob Brady Buick GMC can help you find a car loan confidently, so check out our secure online application, which requires you to submit your employment and income information. Our team will contact you with financing options and walk you through the car-buying process. Visit our dealership located at 1500 Koester Drive, Forsyth, IL, 62535.
