Interest Rates Rise and Fall
Since 2013, the interest rate on car loans has increased by over 2%, while the average cost for a car has increased by over $3,000. Added technology and safety features included in new models have pushed prices up further. Despite the higher prices,consumers prefer larger vehicles, like SUVs, and this has contributed to the climbing costs.
When you combine higher auto prices, increased interest rates and longer loans, those who finance their car purchase could pay up to $6,500 more than they would have five years ago.
The solution most people have considered is taking long-term loans rather than short-term loans, with the average auto loan length now at 69.5 months compared with 65.7 months in March 2013. Generally, though, the longer the loan term, the more interest will need to be paid.
How to Get the Best Car Loans?
For a consumer to get the best car loan with a friendly interest rate, some factors should be considered. These include;
- Car Payments: Most consumers will start by looking at what they can afford to pay every month, taking into account their budget and overall finances. However,car deals can be very tricky, especially with ‘hidden’ costs that could impact the monthly payment and at the end, you could end up paying more than budgeted.Car dealers offer longer-term loans, which means you pay less every month.While you are paying less every month, you will however spend more overall at the end of loan period. Despite this, this option is very popular with consumers;taking on more debt and purchasing a lower-priced vehicle, with the aim of paying throughout the longer-term period.
- Credit Score Advantage: A good credit score has a positive effect on the interest rate on a car loan; the higher the credit score, the lower the interest rate you get. A credit score is the primary indicator every moneylender is interested in; it acts as a reputation, which is always available on a credit report. For you to get a higher credit score, you must have settled all your previous debts and have a history of paying debts on time.
- Time-management in Shopping: Have a target and read reviews from previous consumers. Different rates are available all over the net and you should select one that fits your finances and needs. If you have difficulty selecting, you could also consult with a financial/loan expert.
- Run Deal Numbers: Check for hidden costs and understand the car loan in full before signing. By running the numbers, you are able to ensure that you are working within your budget.
- Shopping at Credit Unions: Another recommendation is to shop at local credit unions. There are different rates available in this system; you will need the help of a car dealer to get a loan at a lower rate. This is another solution for borrowers with a less-perfect credit score. If you want to save money, you might also consider leasing. This is a good way to get the car you want at a lower monthly price. Remember though that a car lease comes with limits on mileage and needs to be returned at the end of the lease period with reasonable wear and tear.
Having a car is a necessity for most people and being able to pay for it upfront is a luxury that many of us cannot afford. Car loans give us the convenience to pay it off on a monthly basis. Stick to your budget, understand the terms of the loan and the interest that will need to be paid.