It is so exciting to buy a new car, and we love picking out the perfect one. In addition to picking out the right car, it is equally important to pick the right auto loan. It is so important to examine all the auto loan possibilities out there. Make sure that you know before you buy.

Would you ever have imagined that the most important part of shopping for a car is finding the right loan? Finding the auto loan that meets your needs best is just as significant as picking which car to buy. Most car shoppers will spend a lot of time comparing prices, makes, and models, but spend very little time examining auto loan possibilities.

One of the first steps to buying a car should be shopping for the right auto loan. Few things will have as great of an impact on the finances involved in your automobile purchase as the loan that you choose. The essential basics of an auto loan will generally cover five different areas.

                Annual Percentage Rate (APR) – APR is a term used to describe the yearly rate of interest that includes all fees and expenses paid to acquire the loan. Lenders must divulge the APR to be in accordance with federal law. Because the APR includes all costs associated with the acquisition of the loan, it is essentially the only rate needed to compare loans of equal length to each other.

                Interest Rate – This describes the annual rate of return received by the lender on the principal of the loan. This is used by the lender to determine how much money they make on the loan. The interest rate is more important to the lender, while the APR remains the more significant of the two for the buyer.

                Down Payment – Simply put, the down payment is the total paid towards the purchase of a vehicle at the time of purchase and the beginning of the loan.

                 Loan Term – The loan term is the length of the loan, generally given in the number of months the loan will be active. Beware of lengthening the loan term to lower the monthly payments. This will substantially increase the time period of the debt and the overall amount of interest that you pay.

                 Principal – Principal is the amount of the actual loan. Generally, that means that it is the final price of the car plus taxes and purchasing fees, minus the down payment and any other discounts or rebates.


Now that I know the basics of auto loans, how do I find a good auto loan? What do I look for?

Well, there aren’t any easy answers to this question, but there are a few keys that may help.

 8 First, make sure you shop for your loan before your car! That will allow you to know what kind of rates are available and will also help you to know whether the rate offered to you by a dealer is competitive.
 8 Compare the APRs, not the interest rates. The APR is the most important number for the purchaser of an auto loan.
 8 Put down as much money up front as you can. A large down payment generally will reduce the time of the debt and the amount you pay.
 8 A dealer may offer you a better interest rate than a bank, but if you get your loan from the bank before you purchase, you may get a better buy from the dealer because you can pay in cash!