Auto Financing 101 | Manassas, VA | Miller Toyota
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Auto Financing 101

Auto Financing 101 at Miller Toyota

Preparing to finance a car in Manassas, Virginia? You can rely on us for a diverse inventory and professional help here at Miller Toyota, and we aim to make your auto financing journey clear and rewarding. If you’re interested in how auto financing works and what you need to get a car loan, take a look at the ins and outs of financing.

What Is Auto Financing and How Does It Work?

Borrowing money from a lender is a convenient way to get the money you need to drive the vehicle you want. To finance the purchase of your car, you’ll need to get an auto loan from a lender (usually a bank or credit union), and then make monthly payments back to them until the auto loan is paid off. Get to know these essential financing phrases to better understand the details:

  • Interest Rate: Interest is the price charged for the auto loan. Interest is calculated as a percent of the loan amount and added to your monthly payments.

  • Conditions: Your auto loan may come with certain conditions like early payoff guidelines or penalties for late payments.

  • Loan Term: This is the duration of time you have to pay off the loan. It could be 36, 48, or 60 months and may influence the monthly payment amount and interest rate.

Types of Auto Financing

Depending on the details of your situation, lenders provide several kinds of auto loans to finance your car:

  • Secured Auto Loans: A secured auto loan typically has a down payment and can also set you up for a lower interest rate. Lenders view secured auto loans as low-risk loans since you have to use the vehicle you’re financing as collateral. If you default on your payments, the lender can repossess the car.

  • Unsecured Auto Loans: This auto loan doesn’t involve collateral, and the lender examines your credit score to set the loan’s interest rate. As lenders believe unsecured loans as riskier than other auto loans, they may set the interest higher. An unsecured loan could be convenient if you don’t need to borrow a large sum.

  • Auto Refinance: In some situations, it can be practical to take out a second loan to pay off the first auto loan. You might benefit from refinancing if you have improved your credit score since taking out the original loan and you want a lower interest rate.

  • First-Time Car Buyer Loans: If you’re purchasing your first car, this auto loan could be available to you with fewer fees and a lower down payment.

Factors that Affect Auto Loan Rates

Determining the interest rate for an auto loan involves these factors:

  • Credit Score: If you have a high credit score, the lender may require a lower interest rate. Lenders usually factor in more than the credit score by itself, however, and they could check out specific criteria like the debt-to-income ratio.

  • Loan Term: Long loan terms can lead to lower monthly payments and higher interest rates. Short loan terms can have higher monthly payments with lower interest rates, which would result in you paying less for your auto loan.

  • Age of the Vehicle: Because lenders see new cars as less of a risk, they can offer a lower interest rate for newer vehicles. Dealers and manufacturers might also provide promotional rates for new models.

  • Down Payment: If you make a bigger down payment, you can usually expect a lower interest rate since you wouldn’t have as much to repay. Remember that you can use your existing vehicle’s trade-in value for your down payment, so take advantage of our online Value Your Trade tool for a free trade-in appraisal.

How To Determine Your Monthly Budget

By setting a budget for your next vehicle, you can avoid a financial commitment that stretches your funds too thin. It helps to buy within your means, and experts encourage car shoppers to keep transportation expenses under 15 percent of their monthly earnings. Make sure to add up the true cost of ownership for the vehicle you want, not just the sticker price. Don’t forget to budget for the car’s maintenance, insurance, and gas or charging expenses.

Get Pre-Approved for an Auto Loan in Manassas, VA

If you’re ready to get started, apply for financing online with Miller Toyota. We make it easy to get an auto loan in Manassas, and with a few quick questions on our application form, you can get pre-approved so that you can shop for the car you want with peace of mind. We look forward to working with you soon at 8566 Sudley Road, Manassas, Virginia 20110.