If you are looking for a new vehicle, chances are you are doing a lot of research on things like safety features and gas mileage. There's plenty to keep in mind when purchasing a new car, and it's essential to find one that fits your lifestyle and that's affordable. If you are looking into financing your vehicle, it's also essential to do your research when it comes to auto loans. Here are three things that you need to know when taking out an auto loan.
How Much You Can Spend
The first thing that you need to know when it comes to auto loans is how much you can spend every month. Having a budget in mind will keep you from spending too much on a vehicle. It's recommended that you spend no more than 15 percent of your take-home pay on your car. This includes your loan payment, gas, insurance, and maintenance costs. So before you commit to an auto loan, make sure that you can afford it. Take the time to work out a budget that factors in all of the costs of owning a vehicle.
The Problems with Longer Loan Terms
Another thing that you need to know when it comes to auto loans is that there's more to choosing a loan than just your monthly payment. Loan terms on auto loans range from 24–72 months. The longer your loan term, the lower your payment. While a longer loan term may help you stay on budget, it may not be the right option for you. Since vehicles lose value quickly, an extended loan term can mean being underwater on your loan, which means you owe more on your vehicle than it is worth.
A Downpayment Is Beneficial
When it comes to auto loan services, it's important to bring a down payment to the table. While it is possible to get an auto loan with little or no down payment, it's usually in your best interest to put at least some money down. With a down payment, you will need to borrow less, and your lender will be more likely to offer you favorable loan terms. Putting down somewhere between 10–20 percent is something to aim for when purchasing a vehicle.
If you are looking into an auto loan, there are a few things that you should know. Contact auto loan providers to learn more about your options.