A new car is typically the second biggest investment people will make, after their home. When spending a large amount of money, you want to spend some time making sure you understand the financing and terms of your purchase. Before you sign a contract with the dealership financing department or the lending institution of your choice, take some time to familiarize yourself with the following common financing terms. Here are some tips from your Largo area Acura dealer for common car financing terms to understand:
Average Cost of a Car
In the United States, the Federal Trade Commission indicates the average cost of a new car is $28,000 while the average cost of a used car is $15,000. The majority of car buyers need a car loan to purchase a used or new car.
Prepare For Car Buying with Credit Research
Don’t go to the dealership to buy a car until you know where you stand financially. You can get a copy of your credit report for free once each year from each of the three credit bureaus, and this provides you with information that lenders will see when you apply for a loan. You won’t get your physical FICO credit score unless you pay for it, but just looking at your credit report should give you a good idea whether your score is low or high based on whether or not you’ve made a lot of late payments or have negative notations on your credit history.
Review your report to make sure there is no inaccurate information that could be causing a lower credit score than you should have. If you find mistakes, take steps to correct them before applying for a loan because it can affect your ability to get approved as well as what your interest rate is on your car loan.
What to Pay Attention to When Getting a Car Loan
When you get a car loan, there are several important aspects to pay attention to before signing the contract.
Principal – the principal of a loan is how much money you want to borrow, although it does not represent the actual cost of your car loan because it doesn’t include interest or finance charges. If you are buying a car that is $22,000 and you have a $2,000 down payment, then the principal loan amount is $20,000.
Loan term – the number of months you will make payments on a car loan is called the “term” of the loan and can range from 12 months to 60 months.
Annual Percentage Rate (APR) – this is what the lender charges you for the car loan. It will add money to your monthly payment unless you happen to get a 0% APR loan.
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