3 Things You Need To Know About Getting A Car Loan

Eventually, you are going to need to replace your old vehicle with a new one. When that time comes, it is natural to need to secure auto financing for your car loan. When it comes to getting a car loan, there are a few things you need to know to ensure you get a good deal on your loan.

#1: Shorter Terms Are Better

Car loan terms used to be short; they were only around two to three years. Nowadays, it is common for car loans to last for five or even seven years. When it comes to loan terms, you want to go for the shortest loan terms possible. Shorter loan terms will help you save money on the vehicle by paying less interest over time. You will also pay the car off soon and go from owing money on the asset to owning an asset. Keeping the loan terms short will ensure you can pay the vehicle off in a reasonable amount of time while the vehicle still has value.

#2: Pay Taxes and Fees

When you purchase a car, you will have to pay fees and, in most states, taxes. You should not bundle the taxes and fees into the loan; instead, you should pay the taxes and fees in cash. Doing this can save you hundreds of dollars on your loan and ensure that the sales tax you had to pay for your car, or the vehicle registration, doesn't double just because you choose to finance those expenses instead of paying them straightforwardly.

#3: Place a Large Down Payment

You don't need to save up enough money to pay for the entire vehicle upfront. However, you will want to save up at least 20% of the cost of the vehicle you want to purchase. Being able to place at least a 20% down payment will allow you to have equity in the car to start with and will lower the amount of money you have to borrow. The more you put down, the lower terms you can accept or the lower monthly payments you can accept. The less you have to borrow, the better.

When it comes to taking out a car loan, saving money, going for the shortest loan terms you can handle, and still afford the monthly payment. Pay all the taxes and fees upfront so you don't have to pay interest on them. Place a sizable down payment to reduce the size of the loan you need to take out.