Your Guide to Auto Loans
Buying a car requires a lot of time and research. On top of deciding on the model and features you want, finding the right financing options can seem overwhelming. That’s why we’ve created this guide to help you navigate the process of financing your next set of wheels.
WHAT LENDERS CONSIDER
To secure a loan for your new or used vehicle, you’ll need to meet certain qualifications set by the lender. The better you meet these qualifications, the more likely it is that you’ll be approved and offered a low rate.
Most lenders look at the following:
Dealerships frequently advertise their “amazing” financing specials to entice people to finance with them. However, the dealership isn’t necessarily your best choice for an auto loan, as they act as a middleman and frequently mark up their loan rates. Other times, the loan offer might truly be great, but the conditions to qualify are so strict that it’s difficult to get approved.
Going directly to a credit union for a loan pre-approval cuts out the middleman, making it easier to get a low rate and giving you an advantage when you negotiate at the dealership. Plus, as a not-for-profit, a credit union like Advancial operates for the good of its members instead of profit.
THE POWER OF PRE-APPROVAL
Getting pre-approved for an auto loan doesn’t just help you set a budget. It’s a powerful bargaining chip as well. To the dealership, you’re the same as a cash buyer, meaning the dealer can’t negotiate based on the monthly payment. Instead, they’re forced to negotiate the total price of the car, meaning you’re likely to pay less – and negotiate less – overall. You’ll also avoid unnecessary add-ons since you’re pre-approved for a set amount.
EXTRA COSTS TO CONSIDER
Before making your purchase, you should know that the price of the car itself isn’t all you’ll need to pay. You can expect several other costs that may put you above your loan pre-approval amount:
Can I get an auto loan if I have bad credit?
Auto loans aren’t as difficult to qualify for as some other types of loans. However, not everyone will qualify. Work on improving your credit or apply with a co-applicant to increase your odds of being approved.
Are APR and interest rate the same thing?
The interest rate applies to the principal balance of a loan only. APR, or annual percentage rate, also factors in fees and costs of the loan.
What is GAP insurance, and should I get it?
GAP insurance, or guaranteed asset protection insurance, is optional protection for car buyers. In the event of a total loss of your car, it can help cover the costs that auto insurance may not cover. This gap in coverage is due to a new car’s significant drop in value in the first few years of ownership. Standard auto insurance will cover the car’s market value and not necessarily what you owe on the loan. GAP insurance covers the difference.
What are Advancial’s current rates for auto loans?
You can find our most up-to-date loan rates online.
When is the best time of the year to buy a car?
The end of the year is one of the best times to buy a car. From October to December, most dealerships are working to meet yearly and quarterly sales goals. To incentivize a sale, dealers are more likely to offer a better deal during these months. If you can’t make it to the end of the year, the next best time is the end of each financial quarter - specifically the last week or last day of the quarter.
Can anyone apply for an auto loan through Advancial?
We encourage anyone to complete a loan application with us. If you aren’t yet an Advancial member and you apply for an auto loan with us, we will contact you to discuss how you may be eligible for Advancial membership.
Ready to get the show on the road?
The team at Advancial can help you get pre-approved for an auto loan. Visit us online or stop by one of our branches to start an application and learn more about our auto loans.
WHAT LENDERS CONSIDER
To secure a loan for your new or used vehicle, you’ll need to meet certain qualifications set by the lender. The better you meet these qualifications, the more likely it is that you’ll be approved and offered a low rate.
Most lenders look at the following:
- Credit history and debt load. The lender will want to know if you’ve had a good record of repaying debts in full and on time. They will also check to see how much debt you have to determine if you can afford an auto loan in your budget. Your credit score and credit report provides all of this information to lenders, so be sure to check yours before applying for a loan.
- Down payment amount. A large down payment on your vehicle can help you qualify for a better loan. Financial experts recommend putting down at least 20% of the purchase price for a new car. Used car purchases should ideally have at least a 10% down payment.
- Loan term. Most auto loans range from three to six years in length. Opting for a longer loan term can cut down on your monthly payments but raise your interest rate. If you can afford the higher payments, you’ll save more money in the long run with a loan that has a shorter term.
- New versus used. Used cars have the benefit of usually costing less than new cars, which means a lower loan balance to pay off. New cars, however, are more likely to qualify for better interest rates. At Advancial, you can rest assured that our auto loan rates are the same whether you choose used or new.
Dealerships frequently advertise their “amazing” financing specials to entice people to finance with them. However, the dealership isn’t necessarily your best choice for an auto loan, as they act as a middleman and frequently mark up their loan rates. Other times, the loan offer might truly be great, but the conditions to qualify are so strict that it’s difficult to get approved.
Going directly to a credit union for a loan pre-approval cuts out the middleman, making it easier to get a low rate and giving you an advantage when you negotiate at the dealership. Plus, as a not-for-profit, a credit union like Advancial operates for the good of its members instead of profit.
THE POWER OF PRE-APPROVAL
Getting pre-approved for an auto loan doesn’t just help you set a budget. It’s a powerful bargaining chip as well. To the dealership, you’re the same as a cash buyer, meaning the dealer can’t negotiate based on the monthly payment. Instead, they’re forced to negotiate the total price of the car, meaning you’re likely to pay less – and negotiate less – overall. You’ll also avoid unnecessary add-ons since you’re pre-approved for a set amount.
EXTRA COSTS TO CONSIDER
Before making your purchase, you should know that the price of the car itself isn’t all you’ll need to pay. You can expect several other costs that may put you above your loan pre-approval amount:
- Sales tax. This can easily add up to thousands of dollars. For instance, a $34,000 car taxed at 6.25% will be charged $2,125 in taxes.
- Title and registration. Title and registration fees vary widely by state, but you can expect to pay an average of about $100 for these fees.
- Dealership fees. Not every dealership has these fees, and they are negotiable. According to Edmunds, the median price of dealership fees is $150 in Texas, $299 in Oklahoma and $200 in Louisiana and Alaska.
Can I get an auto loan if I have bad credit?
Auto loans aren’t as difficult to qualify for as some other types of loans. However, not everyone will qualify. Work on improving your credit or apply with a co-applicant to increase your odds of being approved.
Are APR and interest rate the same thing?
The interest rate applies to the principal balance of a loan only. APR, or annual percentage rate, also factors in fees and costs of the loan.
What is GAP insurance, and should I get it?
GAP insurance, or guaranteed asset protection insurance, is optional protection for car buyers. In the event of a total loss of your car, it can help cover the costs that auto insurance may not cover. This gap in coverage is due to a new car’s significant drop in value in the first few years of ownership. Standard auto insurance will cover the car’s market value and not necessarily what you owe on the loan. GAP insurance covers the difference.
What are Advancial’s current rates for auto loans?
You can find our most up-to-date loan rates online.
When is the best time of the year to buy a car?
The end of the year is one of the best times to buy a car. From October to December, most dealerships are working to meet yearly and quarterly sales goals. To incentivize a sale, dealers are more likely to offer a better deal during these months. If you can’t make it to the end of the year, the next best time is the end of each financial quarter - specifically the last week or last day of the quarter.
Can anyone apply for an auto loan through Advancial?
We encourage anyone to complete a loan application with us. If you aren’t yet an Advancial member and you apply for an auto loan with us, we will contact you to discuss how you may be eligible for Advancial membership.
Ready to get the show on the road?
The team at Advancial can help you get pre-approved for an auto loan. Visit us online or stop by one of our branches to start an application and learn more about our auto loans.
