Three Questions to Gauge Your Auto Loan Readiness
Just because you qualify for an auto loan does not mean that you are ready for one. Often, consumers worry so much about their application approval that they forget to think introspectively, assessing their own reasons for wanting an auto loan. While skimming over your credit report may help determine your financial stability, there are more things to think about than the bottom line.
#1: Are You Upside Down or Right Side Up?
An upside down auto loan spans an unnecessarily long repayment period. For example, although not totally uncommon, loans of 60 months or more are considered upside down because consumers end up paying much more than the vehicle is worth in interest. Half way through the loan period, should you choose to sell or trade-in your vehicle, the balance left on the auto loan should not exceed the vehicle’s price tag. In fact, a quickly depreciating vehicle can also flip a loan upside down if it offers a poor return.
#2: Do You Know the Mean Market Interest?
You should assess a dealership or financial institution’s auto loan offering based on the interest rate rather than the monthly cost. As mentioned above, low monthlies may only indicate a lengthy contract, whereas interest tells you exactly how much of your money goes towards the loan itself and not the vehicle. By knowing the market average and your own credit score, you can ballpark an estimate before walking onto the lot. Although one company may offer steeper interest rates, always consider how rebates, down payments, and other low-interest deals balance the equation.
#3: Can You Handle the Cost of Ownership?
If you can afford to buy a car, be certain you can afford to operate it. In the past, we’ve stressed the importance of calculating insurance, gas, and maintenance, but it’s also important to think about repairs in terms of the body model. For example, a North American vehicle may be cheaper to repair than one manufactured in a foreign country, just as the muffler on a low-end coup will cost less to replace than on a luxury sedan. Always read reviews to see if other drivers have commented on how often the car needs servicing. While online, check to see the vehicle’s resale value to estimate its future worth in relation to the loan.
The Car and Credit Experts
Should you require assistance with your auto loan or vehicle selection, Trillium Auto Group offers stand-up credit and automotive customer services. We will help connect you with an auto loan congruent with your current financial situation and lifestyle. Regardless of your credit score or past driving record, we will ensure that you drive away a happy customer. So call or visit us today and see how our auto loans work for you.