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Dependable transportation most likely ranks high on your list of must-haves. You may, however, find yourself among the ranks of drivers whose transportation has begun to be somewhat less than "dependable." In such a case, you may be thinking about an automobile loan. It is in your best interests to keep in mind your needs and your budget when looking for a vehicle.
It’s hard to not want a new off-the-showroom-floor model, but a new car and a previously owned vehicle come with different loan options, and some may fit your situation better. The issue of a new versus used car can also affect the vehicle price negotiation process. There are no set rules for working out the amount of a final sale. Negotiator personalities often determine how successful you’ll be at getting your hoped-for price. A previously owned vehicle, however, tends to provide a buyer with more negotiation room.
The overall economy and the state of the supply chain can have a significant effect on your ability to strike a desirable sale price deal. Figures reported for 2020 showed that the average final sale price for a new vehicle ran close to $46,000. Under certain economic conditions, you could see final sale prices that are higher than the manufacturer’s suggested retail price. As well, if you’re considering using your current vehicle for a trade-in, keep in mind that its value can also change depending on the economy.
You may consider obtaining a personal loan so that you can pay cash for your chosen vehicle. Paying for a vehicle with cash rather than an automobile loan could be a big plus in a price-negotiation outcome. You will find, however, that there are different interest rates and loan approval standards between vehicle loans and personal loans.
After you decide on your vehicle type and what you can afford, it’s time to consider your loan options. The amount of your down payment, the vehicle sale price and your credit score can affect the range of your financing options. Because lenders vary in their loans approval terms, a less-than-perfect credit score does not necessarily mean you won't be able to get financing. It could, however, affect your interest rate and loan terms.
According to the car-purchase trends reported for 2020, buyers used an automobile loan more for previously owned vehicle purchases than for new car sales. It may, however, prove easier to obtain financing for a new car when lenders can factor in the right credit score and down payment amount. As well, lenders can better determine a new car’s value as collateral for the loan compared to used vehicles.
However, financing a used vehicle purchase can be a more attractive option for many car buyers. The monthly installments for a used car are generally lower and the down payment can be less. The down payment required for a previously owned vehicle could be as low as 10%. Auto loans financed close to 60% of used car sales in 2021, while the reported monthly installment figures showed new car payments averaged about 45% higher than those for used cars.
Although it can become either an advantage or a disadvantage in the long run, an automobile loan for a new vehicle can have a longer payoff length. The interest rates on new car loans also tend to be lower than those for used vehicles. There could be a more than 4% difference between new and used car interest rates. You may also need up to a 20% down payment with a new vehicle loan. Financing accounted for almost 41% of new car sales in 2021. Those vehicle loans came with an average repayment length of about 70 months.
Although it’s a good idea to compare automobile loan rates and options, it can be a time-consuming task. There’s a wide range of lenders looking for your signature on a loan, and there are different options to consider. Interest cost, loan terms and location can be determining factors in your decision-making process.
The main consideration is getting the dependable transportation that you need and the funding you deserve. Billy.com can cut out the legwork for you and connect you with the lender that can best meet your needs. Contact us now and find out how we can help.