Your vehicle is one of the most important purchases you will ever make. It will determine how you get to work, how much room you have for family, and even the amount you spend on gas each month. As such, it requires careful consideration and planning. When you find the perfect vehicle, it’s time to think about how you will finance it. Several factors will determine how much you will be able to borrow, the interest rate you will pay, and your other payment terms. Here’s everything you need to know about Mesa, AZ used car auto loans so that you can drive away in the car of your dreams – at a price you can afford.
The Advantages of Used Car Loans
One of the biggest dilemmas consumers face when considering a new vehicle is the “cash versus finance” question. In reality, very few people have the resources to buy a quality vehicle with cash in hand. It takes commitment, time, and often a large discretionary income to purchase a vehicle in cash. For most of America, this route isn’t feasible, which is why dealerships offer financing for most vehicles available in their lots.
Purchasing a used vehicle on financing has several distinct advantages:
- Financing a vehicle at a low-interest rate can actually help save you money. For example, if you get approved for a low interest rate on a short-term loan, you have extra cash to invest elsewhere and let grow.
- Making reliable monthly payments can help boost your credit score. Whether you are trying to establish credit or boost a score, establishing a good credit history by financing a vehicle can help you secure other financing down the road.
- You can establish a relationship with your dealer or lender that can help you down the road. By making timely payments on one loan, you may be approved at a lower rate for another in the future, for example.
- You can afford a better, more reliable car. Most people can afford to finance more than they can pay as a lump sum. This means that you can afford to spend a little more on a quality vehicle that won’t require costly repairs down the road.
- Buying a car in cash has some surprising disadvantages. Paradoxically, many people default on other payment obligations by trying to avoid debt. Conventional wisdom says that you should avoid debt whenever possible – but instead of paying a lump sum on a car, put that money into an emergency fund or IRA where it can grow over time.
In general, a used auto loan can help you build credit and improve your financial standing as long as you make timely payments.
Why Buy Used?
Since financing seems to make the most sense, the next natural question becomes: “why wouldn’t I buy a new car?” This is a reasonable question, especially with all the new features available on new vehicles. However, purchasing a new vehicle rarely makes sense. The biggest advantage of buying used is the money you’ll save, both at the time of purchase and over the cycle of ownership. Consider, for example, that you buy a new car for $30,000. New cars depreciate the most during the first few years of ownership, so you could sell it three years later at $15,000, possibly owing more on the vehicle than what it’s worth. This is what’s referred to as being “underwater” on your loan.
When you buy a used vehicle, on the other hand, it’s likely to hold its relative value better over time. Buying a car that is only a few years old can give you all the features you want in a newer vehicle but without the high level of depreciation. With the high quality of today’s materials and technology, a lot of newer used cars can go 100,000 before they need major repairs. In general, buying used is a great way to save money while still enjoying some of the advantages of having a newer car.
How Can I Get a Used Car Loan?
If you’re interested in buying a used vehicle, the first thing you’ll have to do is decide how much car you can afford. One of the best ways to do this is by using our Auto Financing Calculator. This tool will help you figure out how much you can expect to pay each month for your used car auto loan, including down payments, interest rates, and monthly payments.
Many customers who come through are doors have an idea of how much they can afford based on their other monthly budget expenses. However, if you’re unsure, use the 20-20 rule as a general guideline. Under this rule, you put down as much money as you can – ideally 20%. Then, spend around 20% of your gross income for the total. For example, if you make $40,000 a year, you have around $8,000 to spend on a vehicle. With a $1,600 down payment, your auto loan payment will be in the $200 range with a 3 year term at a 3% interest rate. You can tweak this based on your other monthly payment obligations, discretionary budget, and other factors. You may be able to spend more on a vehicle if you don’t have a student loan payment, for example.
What Factors Affect My Car Payment?
Calculators provide a good guideline that can help you determine how much car you can afford. Keep in mind, however, that the price of your car payment will have several influences.
Your financing term.
For example, paying off your car in three years will lead to a higher car payment than paying it off over five years. Keep in mind, however, that you will be paying interest throughout the payment term, so electing a shorter period will save you money on interest.
Your credit score.
Generally, the higher your credit score, the lower your interest rate. Many people ask us what credit score you need to get a “good rate,” and there is no one size fits all answer. A lender will take a holistic look at your credit history, including your history of on-time payments, total debt load, credit ratio, and more.
Can I Get an Auto Loan with a Bad Credit Score in Mesa, Arizona?
When trying to obtain a used car auto loan, one of the most common questions we hear is “can I get an auto loan with a bad credit score?” We realize that a vehicle is an essential expense for getting people to and from their jobs, so we work with everyone as best as we can. Generally, you can still get into a quality used vehicle, even with a few dings on your credit report. USA Auto Inc. in Mesa offers flexible in-house financing with guaranteed approval – if you have a bad credit history, come in and talk to us. We can still get you into a quality vehicle at a payment you can afford.
USA Auto Inc. is here to help you with all you used vehicle needs. From choosing the perfect car for your budget to securing the right financing, we walk you through everything from the test drive to signing. To learn more about what kind of car you can afford, peruse our available inventory and use our Auto Financing Calculator.