A good financing deal can save you more than a hard negotiation on price. Three numbers drive it: the interest rate, the term and the down payment.
In this article
- APR
- Term
- Down payment
APR
The annual percentage rate is the cost of borrowing. A one-point difference on a $30,000 loan over five years changes the total by around $800.
| Loan | Term | Approx. total interest* |
|---|---|---|
| $30,000 at 5% | 48 months | About $3,200 |
| $30,000 at 5% | 72 months | About $4,800 |
| $30,000 at 8% | 72 months | About $7,900 |
| $30,000 at 8% | 48 months | About $5,200 |
Costs are typical ranges. Check your own situation and local prices.
Term
Longer terms lower your monthly payment but raise total interest. Many experts suggest keeping loans to five years or less.
Interest is the price of waiting to pay.
Down payment
Putting down 10 to 20 percent reduces the amount borrowed and helps avoid owing more than the car is worth.
Step by step
- Check your credit score
- Get pre-approved by a bank or credit union
- Compare APRs from several lenders
- Avoid a term longer than six years
Practical tip
*Rounded estimates for illustration. Use a loan calculator for exact numbers. A credit union often offers lower rates than a dealer.
Bottom line
Shop for the loan before you shop for the car.
Specifications, prices and rules change. Confirm current details with the manufacturer or the relevant authority before you buy or repair.
