Learn the essentials of what you should know before finalizing an auto loan.
Q: I’m ready to finance a new car. What do I need to know before finalizing an auto loan?
A: Financing a new car will impact your monthly budget for the length of the loan. That’s why it’s important to weigh all relevant factors carefully before making your decision.
Here are some questions to ask before taking out an auto loan.
1. What is the actual cost of this car?
On some lots, you can negotiate with the dealer for a lower price, while others may slide in last-minute and unexpected fees that will ratchet up the price. Before you sign on an auto loan, make sure you know how much you’re actually paying for your new wheels.
2. Is this the lowest interest rate I can get from any lender without extending the term?
Don’t sign that loan contract just yet! First, do comparison shopping to see what rates you can get from other lenders. Remember: this number will determine how high your monthly payment will be until you own the car outright.
3. What will my monthly payment be with this loan?
Your monthly payment will be determined by the loan amount, the annual percentage rate and the loan term. You’re best off running the numbers on a potential loan before you close on it to be sure you can afford the payments.
4. Are there available incentives that can lower the cost of this loan?
Ask the lender about any available incentives that can bring down the cost of the car, such as a cash-rebate incentive or dealer cash. Most incentives will only be offered if you ask, so do speak up!
5. Do I really need an extended warranty?
If you’re buying a new car, it probably includes a factory warranty covering the vehicle up to 100,000 miles, so an extended warranty is unnecessary. If you’re buying a used car, have it professionally inspected and get a vehicle report on Carfax.com to see if you really need that extra protection.
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Your Turn: Which factors do you consider before finalizing an auto loan? Tell us about it on our Yammer page.