Financing 101 in Auburn, NY

Auto Financing Guide at Fox Subaru

If you're preparing to buy a vehicle, then financing your purchase is a crucial step in the process. Your purchase is a major investment, so it makes sense to know all the details of auto financing so that you can make informed decisions. When you want to get an auto loan in Auburn, New York, we'll be here to help at Fox Subaru. We want to demystify auto financing for you, so let's dig into the details.

What Is Auto Financing and How Does It Work?

If you aren't planning to pay the full price of the vehicle from your savings, then financing your purchase via an auto loan can allow you to bring the car home and pay it off over time. To finance a vehicle, you apply for an auto loan from a lender (usually a credit union or bank). The lender will let you borrow a certain amount of money for your purchase, and you'll then have a set term to pay off the amount borrowed plus interest. For a clearer picture, familiarize yourself with these essential financing terms:

• Interest Rate: In addition to repaying the money you borrowed, you must pay the lender interest - the price charged for the auto loan. The interest rate is calculated as a percentage of the amount you borrowed.
• Conditions: Your auto loan may come with certain conditions, which can include penalties for delayed payments or rules governing early payoff.
• Loan Term: This is the length of time you're given to repay the auto loan. Loan terms are commonly set for 36, 48, or 60 months.

Types of Auto Financing

Different car shoppers have different circumstances, and there may be a variety of auto loan options available to you depending on your situation:

• First-Time Car Buyer Loans: If you're buying your first vehicle, you might qualify for this loan, which might let you take advantage of perks like waived application fees or a lower down payment.
• Secured Auto Loans: For a secured auto loan, you'll put down your new vehicle as collateral. This makes the secured loan less of a risk for lenders, as they can repossess your vehicle if you default on payments. Because this loan is less risky for lenders, it can yield a lower interest rate.
• Unsecured Auto Loans: You won't back this auto loan with any kind of collateral, and because it would be considered a higher risk for lenders, it may involve a higher interest rate. It's a convenient option if you don't have to borrow a large sum.
• Auto Refinance: For some drivers, it might be advantageous to take out a second loan to more easily pay off the original auto loan. Auto refinancing may be helpful if your credit score has improved and you'd like to lower your interest rate.

Factors that Affect Auto Loan Rates

These factors help lenders determine the interest rate for your auto loan:

• Credit Score: If your credit is in good condition, you can likely access a low-interest rate. Lenders usually look at the details surrounding your credit score and not just the number itself, and they may consider factors like your debt-to-income ratio.
• Loan Term: The amount of time you have to repay the auto loan can influence how much you end up paying in interest. If you opt for a shorter loan term, you'll have less time to repay the amount you borrowed, allowing you to pay off the loan with fewer monthly payments.
• Vehicle Age: Because lenders consider new vehicles less likely to break down, new models may come with a lower interest rate than used options. New vehicles might also be eligible for promotional rates from the dealer or manufacturer.
• Down Payment: If you make a big down payment, you can significantly lower the amount you'd still owe, which can result in a lower interest rate.

How To Determine Your Monthly Budget

If you set a budget for your next vehicle, you can ensure that your investment won't stretch outside your financial comfort zone. To keep your automotive expenses within your means, consider the conventional car-buying guidance that transportation expenses shouldn't exceed 15 percent of your monthly income. Just be sure to factor in the vehicle's true cost of ownership, not just its sticker price. Remember to account for additional costs like the interest rate, fees, car insurance, gas prices, and maintenance.

Apply for an Auto Loan in Auburn, NY

When you're ready to get started, you can apply for financing online with our safe and secure form. You'll have to answer a few questions about yourself and your finances, and then we'll be in touch to go over the details with you. At Fox Subaru, you can rely on our finance experts to take the hassle out of your car-buying experience, from finding the model you want to secure your auto loan.