Budgeting 101: How to Determine Your Auto Loan Options
Whether you’re a teen driver shopping for your first car or an adult upgrading from an older model, buying a new car is an exciting time in any driver’s life. However, it can also be overwhelming as you navigate the options available for financing your new car purchase in Tennessee. Fortunately, the personal lenders at Citizens Bank are here to explain your options and help you get into your new car today.
How Much Car Can I Afford?
Before you head to the dealership, you want to know what you can afford. Tools like Citizens Bank’s car affordability calculator can help you. However, you’ll want to look at the following factors as you budget for your new car purchase.
Monthly Payment
When you finance a car, you make monthly payments towards the purchase price plus interest. You want to know the amount you can afford to pay each month before making the purchase. Look at your budget and other monthly expenses to determine the amount of money you have to use for a car payment.
Credit Score
Your credit score determines your creditworthiness to lenders for car loans. Having a higher credit score can help you access better lending options with lower interest rates. To find out your credit score, request your free annual credit report from major reporting agencies like Experian, Equifax, and TransUnion.
Down Payment
To reduce the amount of your car loan, consider making a down payment for a certain percentage of the purchase price. When purchasing a new car, it’s recommended that you make a down payment of around 20%. This means that for a car that costs $25,000, you would be making a down payment of $5,000.
Trade-in Value
If you already own a car and are simply looking for a newer model, consider trading it in. By trading your old car in, you can lower the cost of your new car by the amount that your previous vehicle is worth. Tools like Kelly Blue Book can help you determine your current vehicle’s trade-in value based on factors like its age, mileage, and features. However, the dealership will perform its own assessment of your vehicle to determine what they’re willing to pay for it.
Loan Terms & Interest Rates
Unless you can afford to purchase a car in cash, you have to factor in expenses related to your auto loan. To accommodate different needs and budgets, auto loan terms can vary in length between 2-6 years.
These loans will also have varying interest rates depending on your credit score and other factors determined by your lender. The interest that your loan collects over time will factor into the total purchase price of your car.
Savings Available
Saving money for a future car purchase is a smart decision. Some drivers begin to plan for their next vehicle purchase a year or two ahead of time. This allows them the opportunity to use short-term savings tools like certificates of deposit (CDs) to save up for a down payment or to purchase a vehicle in cash. If you have such savings, factor them in when determining how much car you can afford.
What are My Auto Lending Options?
If you are not purchasing your car in cash, there are a variety of financing options available to you. Sometimes, dealerships will offer promotions with 0% financing or lower interest rates if you finance your vehicle there. These deals may depend on the type of vehicle you purchase.
Like any other lending option, the dealership will look at your credit history and other factors. However, most people go through a bank or other financial institution. Citizens Bank offers our members a variety of auto financing options tailored to their personal needs and budgets.
Start Your Car-Buying Journey at Citizens Bank
While the car buying process can be daunting, the personal lenders at Citizens Bank are here to walk you through your financing options. We will help you find an auto loan that fits your needs and complete the application. To get started on your car-buying journey, contact us online, call us at (615) 327-9787, or visit one of our branches in Nashville or Memphis.
Explore Your Auto Loan Options in Tennessee at Citizens Bank
Start your car-buying journey with Citizens Bank. We can help you find the right auto loan to fit your needs and budget. To apply for a loan or explore your auto lending options, contact us online, call us at (615) 327-9787, or visit one of our branches in Nashville or Memphis today. We look forward to partnering with you as you make your next vehicle purchase.