Auto Loans 101

Auto Loans 101: What to Know Before Financing

Buying a vehicle is simultaneously exciting and stressful. It is also a significant investment and financial decision. Like any significant decision, understanding the process is crucial. Whether you’re in the market for a new vehicle for the first time, or you’re a seasoned veteran just looking to upgrade, navigating the purchase and auto loan process can be intimidating if you don’t know where to start.

Auto Loan Financing Tips to Consider

Here are five factors that you need to know before financing your next vehicle:

Determine Your Budget: Take a look at what you can afford vs. what you truly need in a vehicle. Sure upgrades are nice, but they might not be worth an extra $5-10k or an additional $250 per month in auto loans. Figure out how much you have saved already for a down payment, and determine how much you can comfortably afford to spend. That’s your budget. Don’t forget though! Your budget should not only include the monthly loan payment, but also other vehicle-related expenses like insurance, fuel, registration fees, and maintenance costs. If you’d rather not own and want to lessen the burden of vehicle maintenance, leasing a vehicle might be your best option.

Credit Score Matters: Your credit score does matter- and quite a lot– when it comes to determining your eligibility for an auto loan and has a pivotal role in determining your interest rate. The higher the score, the more likely you are to receive a lower interest rate and more favorable loan terms. If your credit score isn’t the best, take a look at your budget and how you can boost your credit; paying bills on time, reducing your overall credit card balances, and avoiding new inquiries can all help to boost your score and make you a more attractive borrower.

Determine Your Loan Term: You want to choose a loan term that aligns with both your budget and your financial goals. You may want to consider a shorter term if you’d like to quickly pay off the car and pay less in interest expenses. You’ll have higher monthly bills, but lower amounts in interest over the life of the loan. Longer loan terms, on the other hand, can make monthly payments more affordable and more attractive to those who stick to a strict monthly budget. If you have a higher credit score and a lower rate, you may opt for a longer-term loan. Typically, term options range from 36 to 72 months, with 60 and 72 being the most common.

Down Payment: Your down payment will reduce the loan amount, so you likely will want to save up for a larger down payment. Trading in your current vehicle as well will help reduce the amount you need to borrow and, in return, lower your monthly payment. Typically, a larger payment will also lead to better loan terms and interest rates.

Interest Rates: Lastly, your interest rates will vary depending on your credit score and market conditions, as well as what each institution can offer. Many people choose to go through their dealership and finance through companies like Chrysler Capital and Hyundai Motor Finance, but you want to shop around for the best interest rates to secure your loan. Not only do interest rates vary among different lenders and dealerships, but typically local credit unions can finance your new wheels at a lower interest rate. Now, that’s not a guarantee, but rather a typical trend. Credit unions often offer more competitive rates, and pre-approval from a credit union or lender can give you the best estimate and a clear picture of the loan amount you qualify for.

Auto Financing with Kinetic Credit Union

At Kinetic, we are proud to provide our “Kinetic Car Buying Service Powered by TrueCar.” Not only do our members potentially save thousands of dollars off MSRP with our car-buying service, but it is easy. All you have to do is follow these three simple steps:

Do Your Research

You can research for yourself online or through a variety of services, but did you know we have our showroom as well? Check out our Membership Showroom and you’ll be provided with everything you need to start your car-buying journey. Not only do you get a price and guaranteed savings*, but you can see what others paid for your vehicle as well. Our members save an average of $3,078 off MSRP** for new vehicles. There’s even a free CARFAX report on select vehicles.

Get Pre-Approved

We can offer various options for your car-buying needs, and they’re fast and easy. Whether you’re purchasing a vehicle or refinancing, Kinetic can help save you money with great rates, flexible products, and exceptional service. Applying is easy: call us at 706-320-8575 or simply apply online.

Take Your Certificate To the Dealership

Finally, once you have your pre-approval and you’ve narrowed down your vehicle search to the one you envision yourself driving, just print and take your Guaranteed Savings certificate to the dealership. Then kick your feet up, and enjoy a hassle-free buying experience!

Still, Have Auto Loan Questions?

Don’t worry! Many people often have questions and concerns when it comes to such a large purchase. We are here to help assuage your fears and concerns and simplify the auto loan process for you.

Just give us a call, check out our TrueCar Car Buying Service, or make an appointment to come in to discuss all of your auto loan options.