It’s often better to wait until adequate funds are available before purchasing a vehicle, rather than financing the purchase. One reason for this is that vehicles depreciate fairly quickly, so consumers who finance an auto purchase are often times left owing more on the loan than what the vehicle is worth. However, sometimes an auto purchase is necessary even if it must be financed.
An auto loan is a consumer loan that is secured by the vehicle the loan is paying for. Auto loans generally have a term of 3-5 years and usually charge an interest rate that is lower than that of a comparable unsecured loan. Choosing a longer term will lower your monthly payments but will increase the overall interest you pay on the loan.
Consumers generally spend a lot of time researching the perfect car to buy but don’t spend nearly enough time researching the best way to finance it. Many people obtain auto loans through dealerships because of the convenience of obtaining both the vehicle and the loan at the same place. However, you will likely pay dearly for that convenience–an auto dealership is generally the last place you should look for an auto loan.
In order to obtain the best rate on your auto loan, compare rates from a number of different lenders. Here are some sites where you can quickly and easily obtain multiple quotes:
I would also recommend seeing if you can obtain a better rate using a peer to peer loan.
The number of internet lenders have grown over the years and they often times offer some of the most competitive rates around. When you finance through an online lender, you will get approved up to a certain dollar amount. Then, when you go shopping for a vehicle, you know exactly what your spending limit is.
Being approved for an auto loan before you begin shopping around for a vehicle can greatly speed up the buying process.