What Role Does A Car Loan Play While Purchasing A Car?

Purchasing a new car is truly exciting in anyone's life. One want to make sure he gets the car of his dream and he also needs to choose the best car loan too. At the end the price which one pays is not what the car invoice says and it's the loan cost. Let us assume, one buys a car for $20,000 and he gets a loan for that amount over a period of five years at 11%. The monthly repayment of the loan would be $430.90 and one would repay $25, 853.91 over a period of five years, this is what the car actually cost.

Choosing a correct car loan is very important!
Thus choosing a car financing is more vital than choosing a car or its equally important. This also means that one may be susceptible to advertising because it's easy to think that low rate auto loans are cheaper than high rate auto loans. But, this is not always the case

While choosing car finance it's vital to look at the fine print before one signs a contract. One needs to undergo a lot of research before he start looking for a car, because one can negotiate a better price at the time of purchase and thus can save thousands of dollar. One doesn't need to keep the dealer on hold while he goes and get a car loan and he wouldn't be susceptible to accept a finance deal from the dealership.

Tips for getting best auto loan
One should get a preapproval of car finance from the lender of his choice before he start shopping for a car loan. Keeping cash in front of a dealer before getting a car loan is an added advantage for negotiating with the best price. A preapproval opens the option of negotiating.

• One should get the quotes from different lenders before he chooses which loans he need.
• Check the fine print before concluding with the final decision, this means to make sure that there are no monthly fees to pay or any early repayment fees or any exorbitant application fees.
• Set a budget before making a final decision because at the end one needs to live with the budget and not with the banks.
• The last thing which one needs to do is to get an expensive car loan which inhibits the lifestyle because one cannot enjoy the car he has purchased without the loan.

Now assume with the above example that a person is borrowing $20, 000 over a period of five years with 11% interest rate. Than the monthly repayment would be $430.90. In this if the lender charges a $10 per month as his fees, as many lender do this, the minimum monthly repayment would be $440.90. This will equate to an interest rate of $12.04 and this is the actual figure which one should use while comparing the offers from various lenders.