Financing 101 in Jefferson City, TN

Auto Financing 101 at Tarr Chevrolet

Buying a new car is an exciting time, but it can also be a bit daunting. There are so many factors to consider, from the make and model of the car you want to the price tag. And then there's the financing process.

If you're not sure where to start, don't worry. Getting an auto loan at Tarr Chevrolet in Jefferson City, Tennessee, is actually quite easy. Here's a brief overview of the process:

What Is Auto Financing and How Does It Work?

When you finance a vehicle, you are essentially borrowing money from a lender to buy the car. You agree to pay back the loan amount plus interest over a set period of time, commonly in monthly payments. The lender could be a bank, credit union, or other financial institution. Most of the time, you don’t have to leave the dealership to secure financing, as they have preferred lenders they partner with.

Financing a vehicle purchase is a popular option for many people, as even the most affordable cars are a big investment. Not everyone has the cash on hand to buy a car outright, and financing can help spread out the cost over time.

Here are a few things to keep in mind when financing a vehicle purchase:

Interest Rate:This is the cost of borrowing the lender’s money. It’s represented as a percentage of the actual loan credit.

Loan Term:The loan term is the amount of time allowed to repay the loan. A shorter term means that your monthly payments will be higher, while a longer term lowers the monthly payments. Loan terms are generally set for 36, 48, or 60 months.

Down Payment:A down payment is a portion of the price of the car that you pay upfront. This can be really helpful in lowering your monthly payments. A larger down payment will lower your monthly payments and the amount of interest you pay over the life of the loan.

Types of Auto Financing

There are a few different types of auto loan financing. Learn about them below:

• Secured auto loans: A secured loan means that if you don’t make the agreed-upon payments on your vehicle, the lender can repossess your vehicle. They use your vehicle as collateral, encouraging you to pay your loan.
• Auto refinance: When your credit score improves, your interest for loans are lowered. If you are in a better position now than you were when you originally financed your vehicle, you can refinance to get better rates.
• Leasing: Think of leasing like renting a car. Much like if you rent an apartment from a landlord, you would rent a vehicle from a dealership. Leases typically last three years, at the end of which the vehicle is returned to the dealership. You have the option to then buy the vehicle after the term at a slightly lower price. This is good for those who like to keep the newest models on rotation.
• First-time car buyer loans: First-time car buyer loans are designed to help people with little or no credit history get approved for an auto loan. These loans typically have lower interest rates and other perks, such as a lower down payment or waived application fees. If you're a first-time car buyer, be sure to compare offers from multiple lenders to get the best possible deal.
• Unsecured auto loans: Unsecured auto loans are not backed by any collateral, so the lender relies on your credit score to determine your eligibility. They typically have higher interest rates than secured loans, but they can be a good option if you have bad credit or don't want to make a down payment.

Factors that Affect Auto Loan Rates

Your auto loan rate depends on several factors:

Credit Score: Higher credit scores typically lead to lower interest rates, though other factors like debt-to-income ratio also play a role. It isn’t just about the score.

Loan Term: A shorter loan term means lower interest rates and higher monthly payments. However, this results in lower overall payments because you won't be paying that extra interest for a longer amount of time.

Down Payment: Making a bigger car down payment leads to lower interest rates due to the lower remaining balance. The bigger the down payment, the better. Though sometimes, you may not have a downpayment set aside, which is okay.

How To Compare Auto Loan Rates

When you are shopping for an auto loan, compare rates from different lenders. This will help you save money. Get quotes and compare terms, including the interest rate and the annual percentage rate(APR). APR includes the interest rate and other expenses, so it’s a good way to compare loans.

How to Get Pre-Approved for an Auto Loan

Getting pre-approved for auto financing is a great way to start your car-shopping journey. Pre-approval gives you a clear idea of how much money you can borrow and what your interest rate will be. To get pre-approved, you'll need to share some basic information about your finances, like your credit score, income, etc. Once you're pre-approved and have a good understanding of your budget, you can shop with confidence.

Visit Us at Tarr Chevrolet

If you have any questions about the financing process, give us a call or come see us at Tarr Chevrolet. We hope to see you soon!