Tips on Auto Finance

If you must finance your next vehicle, here are some tips.

You will want to find the lowest interest rate possible. This research can easily be done online faster than making the phone calls to different banks.

Auto dealers can provide financing for you, this way you can do all of the paperwork in one place. Keep in mind they receive a commission for this, so it may help in your negotiation process.

There are different finance programs for different credit categories.

Put as much money down on the vehicle as possible. This will help keep your payment low. Also keep in mind, if the vehicle happens to be in an accident and is not repairable, the lower your balance the more likely to have the loan paid in full by your insurance company.

If you have bad credit or no credit at all, you will want to shop around to maximize your options. A special finance company may be willing to finance the vehicle for you if you have at least 10% down. If you do not have a very large down payment, you may need to seek out financing at a buy here pay here auto dealership. Ask and make sure they report to the credit bureau. If so, this will help you re-establish or establish credit. If you must go this route, it is a good idea to purchase gap insurance.

Keep in mind automobiles depreciate. So as time goes by you want the value of your vehicle to be more than the balance on your auto loan. Any extra payment you can make toward your balance will help the principal decrease.

If you miss a payment on your vehicle you will end up paying more interest in the long run, because interest is accrued daily. Therefore, you will not have your loan paid in full by the end of the term. Most finance companies also charge a late fee if you go beyond a grace period of usually 10 to 15 days. If you must pay late, pay within the grace period.

To calculate your daily interest, take your loan balance, multiply by your interest rate and divide by 365 days. For example, if your loan balance is $10,000 and your interest rate is 10 percent, you would multiply 10,000 x .10 = 1000. Then divide 1000 by 365 days, which is $2.74. This gives you a much better idea of how much of your payment is going to interest and how much interest you will be paying over the term of an auto loan. So any additional payment you can make toward principal really helps.

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