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 Used Car Loan or Pay Cash
Buying a used car usually offers you the same payment
options as buying a new car.
You have two choices: pay in full or get a car loan and
pay over time.
If you finance, the total cost of the car increases.
That's because you're also paying for the cost of
credit, which includes interest and other loan costs.
You'll also have to consider how much you can put down,
your monthly payment, the length of the loan, and the
annual percentage rate (APR). Keep in mind that annual
percentage rates usually are higher and loan periods
generally are shorter on used cars than on new ones.
Dealer, Bank, Credit
Union, or Online Loan?
Dealers and lenders offer a variety of loan terms and
payment schedules. Shop around, compare offers, and
negotiate the best deal you can. Be cautious about
advertisements offering financing to first-time buyers
or people with bad credit. These offers often require a
big down payment and a high APR. If you agree to
financing that carries a high APR, you may be taking a
big risk. If you decide to sell the car before the loan
expires, the amount you receive from the sale may be far
less than the amount you need to pay off the loan. If
the car is repossessed or declared a total loss because
of an accident, you may be obligated to pay a
considerable amount to repay the loan even after the
proceeds from the sale of the car or the insurance
payment have been deducted. If your budget is tight, you
may want to consider paying cash for a less expensive
car than you first had in mind.
If you decide to finance, make sure you understand the
following aspects of the loan agreement before you sign
any documents:
-
the exact price you're
paying for the vehicle;
-
the amount you're
financing;
-
the finance charge (the
dollar amount the credit will cost you);
-
the APR (a measure of
the cost of credit, expressed as a yearly rate);
-
the number and amount of
payments; and
-
the total sales price
(the sum of the monthly payments plus the down
payment)
Check out these other used car topics:
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