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Do you know that used car interest rates change like the wind? One of the biggest buying decisions you will make in your lifetime will probably be your automobile purchase. And if you’re like most people, 70% of all car buyers, you’ll be financing that purchase. Furthermore, most people are fully prepared to take the necessary time to study which car to buy. They like to look at all the variables like reliability, gas mileage, extra features, design qualities and of course the price. What people don’t realize is that usually that last variable, the loan interest rate, has the biggest impact on the price. Given that information, isn’t it fair that you should spend some time doing your homework on car loans. You should go shopping. This is especially true when looking at used car interest rates.
before buying a car
Researching the loan before you get the car can make all the difference when it comes to getting that used car interest rate. It sounds like a simple thing and you might be confused as to why this should be the case. Think about the last time you went to a dealership and looked at a car. If you’re like me, you hate the sight of that salesman approaching you. For a short time you get the idea of being like a caged animal with little chance of escape. We don’t even dare to ask the price. Why, because we know what the answer would be. The salesman, with a victorious look on his face, always came back with something like “it depends”. He can determine the price you need based on all the financing and monthly payments you can afford.
example of interest rate
Let me show you how a change in interest rates can affect the total cost of your next car. I think these examples will help you see why doing your homework on car loans can be so important. If you buy a car for $20,000 and put $3,000 down, your loan balance will be $17,000. See below to see how the interest rate and loan term can affect your monthly payment and overall cost.
5 year loan @ 7%=$336 payments and $23,200 Opp* 5 year loan @ 11%=$369 payments and $25,200 Opp* 6 year loan @ 7%=$289 payments and $23,900 Opp* 6 years Loan @ 11% = $323 paid and $26,300 Op*
*Total value (op) is the cost of the car plus the cost of the loan.
in conclusion
The short term and low interest rate of the loan make the total cost much cheaper. If you do your homework on the front end, it will probably save you thousands. As I mentioned above, the interest on a used car loan varies drastically, depending on where you get the car loan from, the loan tenure, and the amount of time you shop around before you pick up the car. How much shopping do you do? I recommend that you apply with several lenders before deciding which one to go with.
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