Car Buying Tips & Advice – How To Finance a Car Purchase | Edmunds

Car Buying Tips & Advice – How To Finance a Car Purchase | Edmunds


SPEAKER: In a
perfect world, we’d all pay cash for a new
or used car purchase. But in reality, very few of
us have enough money on hand to pay for a car in full. This is where financing
comes to the rescue. Financing lets you
borrow money upfront to make your car purchase. In return, you agree to make
a series of monthly payments until you’ve paid off the
full loan plus interest. How much you pay each month,
and over the life of the loan, is determined by
three key factors. Principal, interest
rate, and term. The principle is
pretty straightforward. That’s the amount
you intend to borrow to complete your car purchase. The interest rate
is the percentage that the lender charges
you to borrow its money. This rate is heavily influenced
by your credit score. In general, the
higher your credit score, the lower your
interest rate, and vice versa. Finally, there’s the loan term,
which is the number of months that you agree to pay back
the loan including interest. At Edmunds, we recommend keeping
your term to 60 months or less, but it’s not uncommon
to find loan terms as high as 84 months. The longer your
loan term, the lower your monthly payments will be. But keep in mind that you’ll pay
more over the life of the loan. Before you even start
shopping for a car, Edmunds recommends that you
get preapproved for a loan. This will help you
manage your expectations for how much you can afford. There are a number
of different places where you can get preapproved. Banks and credit unions are
the most common institutions. But there are also a number
of online lenders out there. Rates and qualifications will
vary from lender to lender, so don’t be afraid
to shop around. Also, keep in mind that
advertised interest rates are typically available only
to those with strong credit scores. So if you have fair
or poor credit, you may have to settle for
offers at higher rates. Once you’re
preapproved for a loan, you can confidently shop
for cars within your budget. Preapproval also
gives you a benchmark to compare against special
dealer finance offers. Most dealers work directly
with their own lenders to offer financing at
lower interest rates than you can find
almost anywhere else. Sometimes these rates
can be as low as 0%. Having a preapproval
in hand will put these special
offers in context, and help you make a more
sound financial decision. Do you want to learn
more about car financing? Just visit Edmunds.com/car-loan.

6 thoughts on “Car Buying Tips & Advice – How To Finance a Car Purchase | Edmunds

  1. thank you for the video . in fact i consider this video as the best informative videos for a car finance. very simple.. i just bought my first car applying for my first car loan my credit score is pretty good but yet i didn't want to go crazy for monthly expensive purchase .
    i can see that the advice in short term monthly payment loan is been advice from almost every body and i just disagree on this one ..
    i did make a long term monthly payment and that was due to unpredictable employment . that for some people would prefer higher interest for affordable monthly payment. that can handle future job worst case scenario better that less short term monthly payment plan that can be a burden.

  2. I use Uber now and cost cheaper then buying now lol plus don’t forget insurance and gas and maintenance no way

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