For many people, having a car is essential. It expands your job search area, means you don’t need to take on potentially unreliable public transport, and makes it easier to access necessary products and services.
However, cars can also be a considerable expense, and especially if you want a new model, you will likely need to take out a car loan. Loans aren’t necessarily a bad thing. Buying a car through a loan not only makes it more affordable but can also help boost your credit score.
At T&I Credit Union, we offer car loans with differing terms at reasonable APRs. Whether you want a brand-new SUV or a modestly used sedan, we can help you finance the vehicle of your dreams.
Make a Budget
Before applying for an auto loan, you should make a complete household budget. Don’t forget to include everyone’s student loans, credit card payments, and all monthly costs. Although a car may seem like a necessity, you should only apply for a loan that works with your household budget and allows you to maintain an emergency savings account.
You should also consider the costs of running a car when creating your budget. In addition to your monthly payment, you will need to pay for gas, maintenance, yearly inspections, and insurance. Don’t forget to include the sales tax and registration costs in your budget as well. The brand and type of car you buy could drastically affect these numbers.
You may have trouble finding mechanics for some foreign-made cars, meaning you will need to travel further and pay more for maintenance. If you live somewhere with easy access to charging stations, you might want to consider saving on gas costs by buying a hybrid or electric car.
Make a Bigger Down Payment
Once you decide how much money you can invest in a car, you’ll need to determine how much you can afford to pay upfront. The larger the down payment you make, the less money you’ll need to borrow.
However, even if you can afford to pay cash, you may want to consider a small loan to boost your credit report score, especially if this is your first big purchase. As long as you pay on time and in full, you’ll add to your credit history, increasing your score.
Consider the Terms of Your Loan
Two of the most significant factors when trying to save money on your car loan to consider are the loan interest rate and the length of the loan. When looking at potential auto loan lenders, you’ll want to look at the APR (annual percentage rate) to learn how much you’ll pay annually for your car loan.
Generally, the APR will be higher for longer loans, meaning you’ll pay more overall. The APR and interest rate will depend on your personal finance situation, credit score, and assets.
You’ll also want to look at the length of the term. T&I Credit Union offers up to 60, 72, and 84-month loans for new cars and up to 60-month loans for used cars. While your car payment will be less monthly on a longer-term loan, you will end up paying more overall because of a higher APR and more interest.
Another thing to consider is any potential penalties. Many lenders will charge a fee if you try to pay off your loan early.
To save the most money on your car loan, take out a small, short-term loan at a low APR. Talk with the representatives at T&I Credit Union to learn what APR you are eligible for with your current credit score or fill out the online application form.
Research the Financial Institution
Before committing to a long-term loan with a credit union, you should research them to ensure they can provide you money and will not try to scam you. The NMLS Consumer Access website is a fantastic resource for anyone considering a car loan or mortgage.
You can also check online reviews, the BBB and ask family and friends for recommendations on who to go to for your car loan. If you already have a mortgage or other long-term loans, you may want to see what options your current lender has for car loans if you like working with them.
Think About Depreciation
Cars depreciate quickly. From the moment you drive your car off the lot, its value will drop. Within the first year, you may see a 20-30% depreciation. You’ll want to factor this quick rate of depreciation into your car loan calculations.
If you take a loan with high interest rates, you may end up paying more in monthly payments than the car is worth by the end of your loan. Instead of this option, you may want to look into purchasing a used car, which usually depreciates slower.
Used cars are also often cheaper than brand-new ones, so you may be able to pay more of the down payment upfront, resulting in a smaller loan. However, if you’re looking at used cars, be sure to research the seller and have a mechanic confirm it is in good shape before purchase.
Contact Your Credit Union
If you’ve found the perfect car but need help financing it, contact the team at T&I Credit Union. We have an online form for auto loan applications but are also happy to assist you with any questions you may have on the phone or in our branch.
Call us today at (248) 397-9471 to learn more about our auto loan options. Let us help you get your dream car.