Few of us are lucky enough to have access to all the finance we need to buy a car on cash. Most of us unfortunate ones come out with an autos loan as well. If you have not taken an auto loan before, and sometimes even when you have, applying for an auto loan can seem like an unnerving experience. This article explains some of the things that will make the process easier for you.
Using an Online Calculator
Knowing how much loan you will need to apply for and what costs will be associated with your car can help you form a reasonable estimate about the size of your monthly payments and how long it will take you to pay back your entire loan. In fact, you don’t even need to calculate the loan amount since there are several online auto loan calculators on the Web that will do it for you. All you need to do is enter the data they ask for and you will get the value of the amount you will be paying every month.
What You Need to Know
You need to know some of the items that you will be asked for by the auto loan calculator or even your local bank when you go to them for a loan. The first thing is obviously the price of the vehicle. This is the list price of the vehicle after any markdowns that the dealer has given you. The next thing that you would be asked for is the amount of the down payment. The down payment is the portion of the vehicle price that you will have to pay upfront before the dealer gives you possession of the vehicle. This is usually given as a percentage of the vehicle price and is stated in the purchase agreement.
Next, you need to calculate the trade-in value of your vehicle. This obviously applies when you are trading in an old vehicle for a new one. The trade-in value will usually be determined by the dealer who is buying your vehicle even though you may have valued it differently. The trade-in value will eventually be taken off the price of the new car that will be charged to you. Thus, you will end up paying less than the original price of the new car.
Do Your Research
You need to get your hands on some of the taxes applicable in your area. Most of the time, the online calculator will have the default sales tax rate inserted for calculation. However, it always helps to do some independent research. So you need to find out what is the going sales tax rate on cars in your area and also the interest rate. At present, the current average interest rate for new cars is 2.98% and that for used cars is 3.25%. Entering these simple details will give you the size of your monthly payment and the number of months over which the loan will be paid in full. The amount that the auto loan calculator gives you will thus be an estimate based on average figures.