Auto Loans Rates and Terms

Auto Loans Rates and Terms When considering how much we can afford to pay for a vehicle, for many of us, the first instinct is to think about monthly payments. How much can we afford to pay per month for our vehicle? While this is important to know, the problem with stopping there is that we don't always consider how long that payment will last and how much will still be owed on the vehicle far down the road when we are ready to look for another one. Unlike houses and some other investments, vehicles depreciate in value over time and will be worth less money when you go to sell or trade them in. Given this, you want to make sure that you get the best loan for a vehicle possible, all around and not just with an affordable monthly payment. Auto loans carry interest and are scheduled to be paid over a set period known as a term. The amount of the loan, your credit score, the interest rate and the term are all factors in determining your monthly payment. Remember, the longer it takes to pay off your loan, the more interest that accrues over the principle amount you borrowed.

So if you take an auto loan for $10,000 with an interest rate of 7.5 percent and a term of 72 months, you payments might be around $200.00, but it is going to take you 72 months to pay off, during which time you are accruing that 7.5 percent interest on the balance and your vehicle is depreciating in value. The same loan with 36 month terms will take far less time to pay off, will cost more per month, but have a lower total cost and your vehicle will have less time to depreciate in value, should you then decide you want to sell or trade it in. In many cases lenders reward customers who choose shorter terms with a lower interest rate at well.