The interest rate on a car loan will depend on several factors, including the type of vehicle you’re buying, how much money you borrow, and whether you finance the purchase yourself or use an auto lender.
The amount of money you need to borrow.
If you plan to buy a new car, you’ll likely need at least $25,000 to cover the cost of the vehicle itself. However, if you’re planning to lease a car, you’ll probably only need enough money to pay off the monthly payments.
The length of time you plan to keep the vehicle.
It’s also important to think about how much you plan to spend on maintenance and repairs. A car with low mileage will require less maintenance than one with high mileage.
Whether or not you will finance the entire cost of the vehicle.
If you decide to finance the full cost of the vehicle, make sure you understand what you’re getting into. Financing the entire cost of a new car means paying off the balance every month, plus interest. This can add up quickly.
The interest rate you will pay.
Interest rates vary widely by lender, so shop around before signing any papers. A good rule of thumb is to compare the APR (annual percentage rate) with other lenders. An APR of 9% is considered high, while an APR of 3% is considered low.
The type of insurance coverage you require for car loan.
If you need collision and comprehensive coverages, make sure you ask what happens if you cause damage to another vehicle. This will help you determine whether you need to add third party liability insurance.
