What to Look for in a Car Loan

August 6th, 2014 by

Shopping at used car dealerships can help you find the best deal on a quality, previously owned vehicle. However, if you don’t get the right car loan, that “deal” could end up costing you more than the higher-priced car over the long run.

Fortunately, most used car dealerships offer a number of financing options to help you find the terms that are right for you. Here are a few tips for how you can evaluate your options to find the right car loan for you:

Understand the Interest Rate

The interest rate you get on your car loan will have a significant impact on how much you pay over the life of the loan. The higher the interest rate, the higher your monthly payment will be and the more you will pay in the long run. However, the interest rate alone is not all you need to know. You also need to understand how the interest is charged. Most car loans have simple interest, but some lenders may try to charge compound interest, which can significantly inflate what you will pay.

Consider the Length

Most car loans are for anywhere from 48 to 72 months, or four to six years. The longer the term, the higher the interest rate will usually be. You’ll have lower monthly payments, but you’ll end up paying more for the car over the long term. By shortening the term, you’ll pay a little more each month, but you’ll save yourself hundreds or thousands in interest. It’s important that you evaluate your short- and long-term financial goals to make the right decision.

Know the Fees

Some car loans charge an origination fee or an administrative fee. Most lenders also charge late fees and penalties for late payments or missed payments. Make sure you understand all the fees associated with the loan so that you understand your total financial commitment. The loan may end up costing you much more than you originally thought.

Getting the right car loan can help you better manage your finances while also getting the vehicle you need. Shopping at used car dealerships can help you save a lot on your purchase, bringing down your overall costs and improving your chances of getting the best financing. McCluskey Automotive is proud to offer our customers some of the best prices on quality used vehicles, as well as a variety of financing options to meet their needs.