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What You Need to Know About Auto Loans Before You Buy

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Most folks thinks you can save the most amount of money buying a car in the negotiations. Maybe you’ll be the first car buyer to expertly negotiate a lower price than anyone who has come before you. But probably not. And even if you did, there’s one way to save even more money on buying a car: figure out the financing ahead of time.


Why don’t most car buyers do this? It’s hard work. It’s boring. It involves a lot of math. It’s a lot easier to let the car dealerships handle it. But if you do just a little bit of research before you hand over your financing decisions, you can save a lot of money. This is what you need to know about auto loans before you buy.


1. You’ll have to pay interest


Unless you’re bringing in the fat stacks yourself, you’ll probably be taking out a loan. That’s okay. Most car purchases, by a long shot, involve a loan of some kind, whether it’s a new or used purchase.


Of course, you already know the basics of a loan: the car dealership or a private party provides you with the money you need to pay the seller of the vehicle. Then you pay that over time, usually with interest. Interest is the cost of borrowing the money, and it goes to the lender to handle overhead and make a profit, among other things.


2. Calculating interest can get complicated


The amount you pay in interest can change big time, depending on the length of your term, changing interest rates, and more. It’s hard enough to do the math when you have the time. It’s even harder when you’re in a hurry, and when you’re distracted by that big beautiful new car. Use a car payment calculator to get a handle on the math. Here’s one by Wells Fargo.


https://www.wellsfargo.com/auto-loans/finance/car-loan-calculator/


3. A longer loan means a more expensive loan


The length of car loans has continued to rise for awhile now. On average, a new auto loan is a 70-month term. That’s a long time! Longer car loans come with bigger risks for you. The biggest mistake a car buyer can make is focusing on that monthly payment. Sometimes it looks very low but you’re paying more interest over a longer period of time than if you were to pay a little more each month. There’s also a risk to your financial future, which only the most savvy buyers will keep in mind: a long-term car loan means your loan balance, or what you still owe in 3 or 4 years, will be higher than the value of the car. And it gets worse after warranties expire and repairs are needed.


Knowing a few things about auto loans when you go into the dealership can help you make the right financial decisions for your future. And Adonis Auto Group is here to help. We offer special financing for folks who think they may not be able to afford a car. But we do without putting your financial future at risk.



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