Hello and welcome back to the blog here at Tonawanda Valley Federal Credit Union! Here on the blog, we like to give you information to ensure our readers are as financially literate as we can help. Today, we want to take some time to talk about auto/vehicle loans. An auto loan is a great way to ensure you can afford a car that you might not have the cash on hand to buy outright.
It's important to note that financing increases the total price for your vehicle, as it incorporates both the car's price and the interest accrued on the loan.
Vehicle financing is typically conducted through either a loan or a lease. When opting for a loan, we highly recommend utilizing our sophisticated loan calculator tool. This resource allows you to evaluate how diverse loan amounts, Annual Percentage Rates (APR), and loan durations may influence your monthly and overall repayments.
On the other hand, leasing operates akin to a long-term car rental. Although it does not confer any resale value, it offers the advantage of lower monthly payments. Please be aware that leases typically impose an annual mileage cap, beyond which additional charges may be incurred. Additionally, maintaining the vehicle in excellent condition is an integral part of your leasing agreement.
Choosing the Right Auto Loan for You
When it comes to choosing an auto loan provider, there are multiple factors to consider. You need to keep in mind the interest rates, loan terms, your down payments, and the impact your credit score can have.
That’s where we come in. Here at TVFCU, we have the best interest rates around so you don’t need to price-shop loan options. We even have a convenient loan calculator tool so you can get an idea of what your total payment will be!
Understanding the Basics of Auto Loans
The principal amount is the initial amount of money that you borrow for your auto loan and doesn't include any interest or additional fees. Essentially, it's the purchase price of the car minus any down payment you make.
Interest is the cost of borrowing money and it's how lenders make a profit. Interest is typically expressed as a yearly rate, known as the interest rate, and it's added to your principal amount over the term of the loan.
APR (Annual Percentage Rate) is a broader measure of the cost of borrowing money. It includes the interest rate and any additional fees or charges associated with the loan. APR provides a more comprehensive picture of the total cost of the loan on a yearly basis.
Default occurs when a borrower fails to meet the legal obligations of the loan, typically by not making the required payments. When a default occurs, the lender may have the right to repossess, or take back, the vehicle. Repossession is a serious consequence and can negatively impact your credit score.
The Auto Loan Application Process
The loan application process can be confusing. Here at TVFCU, we want to cut through that noise as much as we can, so those complex problems can be easily digested as simple solutions.
When you’re seeking an auto loan, there are a few steps to the process to keep in mind. You’re going to need to check your credit score, gather important information (like current proof of income, insurance binder proving coverage, and purchase offer showing VIN and current mileage), negotiate, and finalize.
Tips to Pay Off Your Auto Loan Faster
You don’t need to stay on the first loan you sought out for your vehicle. You can get your loan refinanced by us here at TVFCU! We recently wrote a blog about getting mortgage loan refinancing, and the same principles apply to auto loan refinancing.
Another option available to you is to make larger payments than the minimum. That way, you pay the loan off quicker with larger sums of money.
Get in Touch!
Acquiring a vehicle loan can lead to a few questions. Get in touch with us at TVFCU, we’d be happy to help! And remember, here at Tonawanda Valley Federal Credit Union we have some of the best rates! You can follow along with our blog where we’ll share posts like this one here and more going forward. You can give us a call at 585-343-5627 or 800-722-8224, or by reaching out via our contact form.