When you finance a vehicle, you borrow money from a lender and agree to pay that money back, with interest, over a specified period of time. There are a variety of lenders on the market, including banks, credit unions and various specialty finance companies from which you can secure an automotive loan. Many manufacturers offer financing at attractive rates as well, but you'll need fairly good credit to qualify for these programs. Additionally, interest rates can vary from lender to lender, so it's important for you, the consumer, to do your homework prior to selecting a lender to ensure you're getting the most competitive financing possible. Remember: The biggest factor influencing finance rates and terms will be your credit history.
There are a variety of loan terms available to you. Simply put, a loan term is the length of time you make payments (plus the interest rate) on the vehicle you're purchasing. The most popular loan terms range in length from as short 36 months to as long 96 months, depending on the loan. The longer you extend your loan, the lower your payment will be. Remember, however, you'll end up paying higher interest charges as time goes by.
