What To Consider Before Getting An Auto Loan?

Financing a car is a big decision that will impact your monthly budget for the entire term of the loan. That’s why it’s important to weigh all relevant factors carefully before making your decision.

Here are some questions to ask before taking out an auto loan.

1. What is the actual cost of this car?

In many dealerships, the sticker price on a car and the one you end up paying can be vastly different. On some lots, you can negotiate with the salesperson for a lower price, while others may slide in last-minute and unexpected fees that will bring the price up significantly. So before you sign an auto loan application, make sure you know how much you're paying for.

2. Is this the lowest interest rate I can get from any lender without extending the term?

The interest rate on your loan determines how high your monthly payment will be and how much you’ll be paying overall for financing your car. The range of rates you'll be offered will depend on the lender, the market rates at the time, your credit score, and your credit history. So be sure to shop around and check what different lenders can offer you before deciding. At Community Resource Credit Union, our auto loan rates are as low as 5.89% APR*.

3. What will my monthly payment be with this loan?

Your monthly payment will be determined by the loan amount, the annual percentage rate, and the term. It's best to use these details to run the numbers on a potential loan to be sure you can afford the monthly payments (there are hundreds of monthly payment calculators throughout the internet). Defaulting on an auto loan can mean risking the repossession of your vehicle and a massive dent in your future credibility. You'll also be better prepared to add this new payment into your monthly budget if you have a number to work with before finalizing the loan.

4. Are there available incentives that can lower the cost of this loan?

Before closing on a loan, ask the dealership about any available incentives that can help you save on the cost of the car. Here are two incentives you may be able to access:

• The cash rebate. This incentive allows borrowers to apply a dollar amount to the price of a vehicle, effectively bringing down the price. Then, when the loan is finalized, the borrower receives the discounted amount in a cash rebate. These rebates are typically offered regionally or under specific circumstances, such as to repeat buyers of a particular brand, buyers who have left a competing brand, recent graduates, or members of the military.

• Dealer cash. This incentive is similar to the cash rebate, but the dealer offers it instead of the automaker. Dealers may offer these incentives near the end of the month, quarter or model year, as they scramble to reach a quota set by the automaker.

5. Do I need an extended warranty?

Dealers can be overly eager to sell extended warranties to new car owners, but these may not be in the buyer's best interest. If you're purchasing a new car, it likely comes with a factory warranty covering the vehicle up to 100,000 miles, making an extended warranty an unnecessary expense. On the other hand, if you're buying a used car, have it thoroughly inspected by a mechanic and get a detailed vehicle report on AutoCheck.com or Carfax.com to see if you need the extra protection that an extended warranty provides.

Are you ready to purchase your car? Community Resource Credit Union can help you finance it. Apply in branc h, online, or call us at 281.422.3611.