What car financing options are best for you?

When shopping for a new vehicle, perhaps the most confusing part is financing. There are a lot of questions that each individual driver must answer. How much are you looking to spend on a prospective vehicle? What financing rate are you able to get, based on your credit score? Are you looking to make a down payment? How long of a loan term would you like to have? Ok, let’s pause and take a few deep breaths before we dig in. There’s a lot to cover here.

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How much money do you want to spend on a car?

This is probably the most important question to answer from the beginning of your car search. Although several factors may affect this, it’s best to have a rough idea of your budget. Remember, the cost of the vehicle likely does NOT include taxes, title, registration, plates, and some other fees, so consider that cost on top of the base cost of the vehicle.toy blue car on top of calculator

What financing rate can you get? And what does that mean for you?

Your financing (or interest) rate is very dependent on your credit score and history as well as the type of institution you get your car loan through. You may be able to finance through the dealership, the OEM, a bank, or some other financial institution. In terms of financing, a lower interest rate is better because it means you’ll be paying less interest overall. A higher rate means higher interest. Typically, the annual percentage rate (APR) for car loans can range from 3% to 10%, with the national average falling around 4.2%. In some cases, you may be able to get a lower rate for used or certified pre-owned models.

Do you want to make a down payment?

Down payments are sometimes required for vehicle purchases, but not always. If you have the means to make a down payment, we recommend it. It allows you to pay some money up front that will not incur interest, which means you’ll be paying a bit less overall.

How long of a loan do you want?

Typical loan terms can range from 30 months to 72 months (and sometimes even 84 months). A longer car loan term means lower monthly payments, but it also means you’ll be paying more interest overall. Shorter terms typically have lower interest rates, though it might mean paying a bit more each month.

Read more: 10 Questions to ask yourself when buying a car

In the end, it’s up to you to weigh your options and determine which financing situation is best suited for you and your budget. Here at Toyota Vacaville, we would be more than happy to sit down with you and help you figure out a plan that works for you. Get in touch with us to learn more!