Financing 101

Auto Financing in Crestview, FL

If you need help finding the right financing deal, then our team has put together a guide so you can know the ins and outs of the auto financing world. Being prepared financially before you purchase a new vehicle can take your car-buying experience to the next level. So, before you go test-driving a vehicle, check out these helpful tips to help find the best financing agreement that meets your needs.

What Is Auto Financing and How Does It Work?

Auto financing is when you borrow money to buy a car and then set up a payment plan to pay it back over a period of time. You will typically borrow money from either a credit union, bank, or other lender, and then you will make monthly installments until the vehicle is paid off. The core elements of an auto loan include conditions, interest rates, and loan terms.

Conditions: Set rules or guidelines required when paying off the loan. Your loan conditions also underline penalties that you may face if you have a late payment.

Interest Rates: This number is a percent and is the cost of borrowing the money to pay for your vehicle. Loan terms vary and can be anywhere from 36 months (three years), 48 months (four years), or 60 months (five years).

Loan Term: The amount of time to pay back a loan.

Types of Auto Financing

Trying to decide which auto financing plan works with your needs is beneficial. So here are some of the most common types of auto financing:

• First-Time Car Buyer Loans: This loan is specifically designed for first-time car buyers. Some benefits of a first-time car buyer loan are that they have lower interest rates than compared to traditional auto loans and may waive application fees or even lower the down payment requirement.
• Secured Auto Loans: In simple terms, this is a loan that uses collateral, typically the vehicle itself, as security. So, if you default on your loan or stop making payments, the lender can repossess your car.
• Auto Refinance: Basically, you are replacing your current auto loan with a new one. An auto refinance helps you pay off the original loan with the new one.
• Unsecured Auto Loans: Unlike secured loans, your vehicle is not used for collateral, so the lender will rely on your credit score to determine the rates. These loans are also known for having higher interest rates than secured loans.
• Lease Financing: Leasing a vehicle is like renting a vehicle for a set period of time which ranges between 24 to 26 months, then once the lease is up, you have to decide whether to return the vehicle, buy it, or lease a new one. Leasing a vehicle does not mean you own the vehicle.

Factors that Affect Auto Loan Rates

Your auto loan can be affected by factors like:

• Down Payments: The more you put toward your down payment, the lower the interest rate because you’ll be financing a lower amount. Car buyers typically will trade in their current vehicle and use its value as a down payment. Determine the value of your trade-in vehicle with our useful tool.
• Credit Score: High credit scores equal lower interest rates. However, you must also consider the debt-to-income ratio and your income.
• Age of the Vehicle: Lenders will base the risk value of your vehicle on its age, so new vehicles will have lower rates when compared to used vehicles.
• Loan Term: Interest rates will be lower if you have a shorter-term loan; while your monthly payment may be higher, the cost of financing will be lower.

How To Compare Auto Loan Rates

Get in touch with a variety of lenders so you can compare terms and interest rates. When you’re trying to find the right auto loan, make sure to consider the annual percentage rate (APR). You can ultimately save money by comparing auto loans.

How To Determine Your Monthly Budget

It is recommended by finance experts to spend no more than 15% of your monthly income on transportation, insurance, and car payment.

One way to determine how much you afford to spend on a monthly car note is by determining your monthly net income – how much you take home after health insurance and taxes. Then create a list of vehicles you’re considering and how much it would cost on insurance and fuel, subtract that number from your net income, and that is how much you can afford on a vehicle.

To get a quote for auto insurance, simply contact your preferred insurance company.

How to calculate estimated fuel expenses

If you’re not sure what your fuel expenses will look like, then multiply the average distance you commute, but the average number of days in a month – typically, there are 30 days in a month.

Now multiply that number by the current price per gallon. Consider adding a dollar to the price per gallon to account for any functions.

How to Apply For Financing At David Scott Lee Crestview Buick GMC

At the David Scott Lee Crestview Buick GMC dealership, we make it easy to apply for financing with our secure and easy application process. Be prepared to provide information like your employment and monthly income. Once your application is completed, our team will reach out to you and discuss potential financial options, so you know what you can afford moving forward. Stop by our dealership located at 4300 South Ferdon Boulevard, Crestview, FL, 32536, if you want to learn more about financing a vehicle.