5 Surprising Facts You Didn’t Know About Auto Loans
Buying a new car is a big decision that many people face several times in their life. Wise consumers know that it’s about more than just the sticker price. Your overall cost hinges a great deal on the interest rate of your auto loan. Although you’re probably aware of this fact, there are several things that might surprise you about acquiring a car loan.
1. Shorter loan terms could save money
It’s understandable to avoid brand-new cars because they depreciate in value so quickly, but you should reconsider that stance. New car loans tend to have lower interest than used car loans. If you agree on reduced term length for your loan, the interest rate often drops significantly. That means the overall amount you pay could be thousands of dollars less.
2. You are usually better off going to the bank
The convenience of setting up financing at the dealership office is undeniable, but don’t pull the trigger so fast. The profit margins at auto dealerships are very low. They make most of their money through other services, including auto financing. Dealerships often jack up the interest rate in order to make a profit. It’s worthwhile to visit lending institutions and shop around for the best auto loan.
3. Zero percent financing might not be a good deal
Some people with good credit qualify for zero financing deals. This sounds ideal, but you shouldn’t jump the gun before you consider all the options. Many times, when you accept zero financing, you are no longer eligible for factory rebates. In many cases, the factory rebate offers greater savings than the zero financing deal.
4. Zero percent interest usually comes with caveats
Zero percent interest seems like the obvious choice, but you have to look at the fine print. In many cases, these deals require a large down payment or a short-term loan agreement. You also have to be on the lookout for inflated costs of add-ons and extended warranties.
5. A used car might not be cheaper
You might be in the market for a used vehicle because you don’t think you can afford a brand-new car. However, new car loans usually have lower interest rates. If you have good credit and can qualify for zero percent interest, the cost of a used car might actually end up higher than the same model that is brand new.
It always pays to be skeptical in the car industry. Before you sign a loan agreement, examine all the options. Don’t be too eager to drive away with your shiny new car until you shop around for the best loan. Your wallet and your credit rating will probably thank you years from now.