Did you know that used car interest rates change like the breezes over your head? One of the biggest buying decisions you will make in your lifetime will likely be your automobile purchases. And if you are like most people, 70% of all car buyers, you will be financing that purchase. Furthermore, most people are perfectly willing to take the time necessary to study which cars to buy. They like to look at all of the variables like reliability, gas mileage, added features, design qualities and of course price. What people do not realize is that what generally has the largest impact on that last variable, price, is the interest rate of the loan. Given that information, doesn’t it stand to reason that you should spend some time doing your homework on the car loan. You must shop around. This is particularly true when looking at used car interest rates.
Before You Shop For a Car
Searching for the loan before you have picked out the car can make all of the difference when getting that used car interest rate. It sounds like a simple thing and you may even be confused as to why this must be. Think about the last time you went to a dealership and looked at a car. If you are like me, you just hate the sight of that salesman approaching. For a brief moment you get thoughts of being like a caged animal that has only a narrow chance of escape. We don’t even dare ask the price. Why, because we know what the answer will be. The salesman, with a victorious look on his face, always comes back with something like “it depends.” He can make the price whatever you need it be, all based on the financing and the monthly payments that you can afford.
Interest Rate Examples
Let me show you how interest rate changes can affect the overall price of your next car. I think these examples will help you begin to see why doing your homework up front on the car loan can be so important. If you buy a car for $20,000 and put $3,000 down, your loan balance will be $17,000. Look below to see what the interest rate and loan duration can do to your monthly payment and overall price.
5 year loan @ 7%=Payment of $336 & op* of $23,200 5 year loan @ 11%=Payment of $369 & op* of $25,200 6 year loan @ 7%=Payment of $289 & op* of $23,900 6 year loan @ 11%=Payment of $323 & op* of $26,300
*Overall Price (op) is the price of the car plus the price of the loan.
The shorter duration and lower interest rate loans make the overall price much cheaper. If you do your homework on the front end, it will possibly save you thousands on the back. As I mentioned above, the interest on used car loans change quickly, based on where you get the car loan, the duration of the loan, and how much shopping around you do before you choose the car. I recommend applying with several lenders before you decide upon whom to go with.