Thursday 20 October 2011

Articles Loans

New car buyers should educate themselves about auto financing long before they step into a dealer showroom. Learning about financing from a dealer salesperson on the day you intend to buy a car is not the best way.
The factors that determine how much you'll pay for an auto loan are 1)amount to be financed, 2)loan term (months), and 3) interest rate (finance charges).
The amount to be financed will include the vehicle price that you and the dealer agree upon, plus any additional costs such as credit insurance, extended warranty, and dealer-installed optional equipment. This amount may also include fees and taxes involved in the purchase. This amount can be reduced by any down payment, rebates, or trade-in allowance.
Loan term is the number of payment months, and can range from 24 months to 72 months or more. Generally, the longer the loan, the lower the payments. However, there are disadvantages to long-term loans. Long loans with lower payments do not pay down the loan principal as quickly as a shorter loan. This often creates a "negative equity" situation in which the loan balance exceeds the current market value of the vehicle. This can become a problem if the owner wants to sell or trade for another vehicle in the middle of the loan. Furthermore, if the vehicle is stolen or totaled in an accident in mid-loan, insurance only pays current market value, not outstanding loan balance.