Evaluating Auto Loan Options and Rebates

A person who is interested in buying a car typically takes out an auto loan for the purchase. Auto loans are a debt made with a loan agreement between the borrower and a lender. There are terms and conditions associated with every loan that should always be reviewed.

Understanding Auto Loans

A car loan is based on the amount needed to purchase a vehicle, plus a rate of interest. Other aspects of the loan include the length of time payments need to be paid. The repayment period is typically anywhere between 36 to 60 months (3 to 5 years). There are also provisions in the loan regarding late payment fees and what can occur in the event of loan default.

Understand the Loan Agreement

A borrower should know how to read a loan agreement and determine if the provisions are favorable. A few items to look for are the loan interest rates, fees, charges. Also, a borrower should pay careful attention to early repayment penalty fees.

A borrower’s credit rating and down payment will also influence the cost of the auto loan. The larger the down payment, the better the rate they will receive for the loan.

Rebates and Allowances

Rebates that are offered by a dealer or vehicle manufacturer can also factor into a great deal. A rebate is a reduction in the vehicle’s price that the manufacturer allows gives the buyer of the car. Larger rebates lower the price of the card. Consequently, this should result in a better interest rate because the down payment is typically higher and the cost of the vehicle is reduced.

Dealer’s Cost and MSRP

A borrower should also find out how close the price of the car is to its manufacturer’s suggested retail price (MSRP). The dealer’s cost is the price that the dealer pays for the vehicle from the manufacturer. The MSRP is the price that includes the dealer’s mark-up, which is offered to the public. In some cases, a savvy automobile buyer can negotiate a loan whose rate is based on a lower dealer’s costs or close to the MSRP which can result in an overall lower cost and expense.

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