Buying a car or looking at auto finance? Make sure you know how interest rates work and what they look like before you consider getting an auto loan.
What is the car loan rate?
The amount of money you borrow when you go to a car dealership to buy a car is determined by the car loan rate. This rate will also be determined by the credit worthiness of the borrower and their expected monthly ability to pay back the borrowed amount. Traditionally, one tells how much “a good rate” is by calculating how much interest $1000 would accrue if placed in an account for 10 years at 12%.
History of the car loan
The history of auto loans could be written in three different decades. The first, born when automobiles made their debut, was characterized by the auto loan as a temporary solution to ensure financial success without a long-term commitment. A second era emerged in 1958 with the birth of credit and continues to this day. With the increased innovation and improvement in car manufacturing and advances in technology, auto loans are slowly morphing into affordable mortgages that provide lower rates over the longer term.
What are the benefits of auto loans?
Auto loans are very beneficial to those without the credit score to qualify for a personal loan. Several auto loans offer low rates that are significantly less than other types of loans. These loans usually require minimal paperwork and can be funded quickly.
Why people should purchase auto loans
There are many reasons why car owners should purchase an auto loan. The first is that the interest is tax deductible. This means that for every dollar that you pay in interest, the government will reduce it’s taxes by 50 cents. In fact, if you make payments on your loan for a large enough amount of time, you could put off paying taxes for years. Another reason to take out an auto loan is because the cost of purchasing cars has gone way up due to taxes and gas prices.
How much do auto loans cost?
The cost of the loan can vary depending on a variety of factors. It depends on the type of car you are borrowing, the make and model, dealerships and financing groups, credit score, etc. Auto lenders value people who use a greater number of services provided by them as well as offer strong financial growth over time so they generally provide better rates for borrowers.
Through my research, I found an auto loan rate that was the best for me. The given loan interest rate for my demographic is a 4.29%. This means that if someone such as me would borrow $30,000 for 60 months with this auto loan program, it would be a total of $1885 to pay back.