When you’re on the hunt for a used vehicle, not only do you want to get the best car, but finding the best used auto loan is high on your priority list.
There’s a reason why your loan is important. Secure the right loan, and your terms will be favorable. You’ll pay less in interest, and your repayment process will be better. However, if you opt for a lender willing to give you an unfavorable loan, you’ll likely pay much more over the length of your loan due to terms that aren’t suitable.
Thankfully, finding the best used auto loan is easier than you think. You can even start the process from the comfort of your home.
The first step is to decide how much you can afford. You want to do this before looking for a loan because your pre-approval might tell you that you qualify for more than you can comfortably pay.
Look at your income, as well as household and personal expenses, to see how much you can afford to pay each month for your new vehicle. Also, determine how much money you have for a downpayment at the time you apply for your loan. Finally, think about how long you want to repay your loan.
Once you have all of this information in mind, consider the type of car you’re interested in purchasing. Does that vehicle fit within your budget? You can use an online calculator to get an idea of how much your monthly loan amount would be based on the down payment, interest rate, and vehicle cost you input.
When you complete these steps, you’re setting yourself up for a more affordable and financially comfortable used car loan experience.
Now that you have an idea of the loan you can afford, as opposed to focusing on what you qualify for, it’s time to research loan lingo. The words you’ll hear most often are the interest rate, loan term, and fees.
Your annual percentage rate (APR) is how much you pay each year to take out your loan, and this is usually expressed as a percentage (ex. 2.99% APR).
This amount can considerably impact how much you pay for your loan each month and over your loan term. You want to find the lowest interest rate you can, so you can keep your used car loan costs low.
Your loan term is the length of time you have to repay your loan. This can range greatly depending on the age of your vehicle, your lender, your credit, and other factors. Typically, you’ll find repayment options ranging from 1-8 years.
One important thing to keep in mind is that the longer your loan term, the less you’ll pay each month, but the more you’ll pay in interest. The opposite is true the shorter your loan term. So, it’s vital that you look not only at your monthly payment but also how much you’ll pay over the life of your loan.
The term “fees” is very broad but can encompass any additional money you’re responsible for paying associated with purchasing your used vehicle. These fees may include things like your loan origination fees, title fees, registration fees, dealer fees, etc.
Now that you have an idea of how much you can afford and the loan lingo to keep in mind, you want to research your used auto loan options.
Your lender choices can vary from banks to credit unions to online-only lenders. When you research your lender options in advance, it can save you time, so you’re only applying with the best lenders for your financial state and needs.
Also, researching helps to prepare you for what to expect concerning essential parts of the used car loan process, like your interest rate and other loan terms.
If you want the best used auto loan, you want to get a preapproval. Once you’ve researched your auto loan options and compared the interest rates and other terms they offer, you want to select a few in which to apply. Be sure to do this within a short time frame. If you do this within 45 days or so, you’ll only get one hard hit on your credit.
To get a preapproval, you apply online, providing the lender with your personal and financial information. Your lender will then let you know whether you’re pre-approved and the terms you qualify for. You’ll know your maximum loan amount, interest rate, monthly payment, etc. Compare loan offers and select the best used auto loan out of those choices.
Now with a preapproval, you can go to your dealership with the knowledge of how much you can afford realistically and how much the bank is willing to loan you. This allows you to focus on finding the right vehicle at the best rate since you’ve already secured the best used auto loan.
If you’re in the market for a used vehicle, then you want to be sure you’re getting the best used auto loan for your needs.
Making an informed decision is the smartest way to select the right loan for you. Be sure to follow the steps outlined above because doing proper research and comparing your options can make all the difference in the loan you obtain.
Whether you’re ready to get your used vehicle in the next week or the next few months, we invite you to discover used auto loan options from Arbor Financial Credit Union.