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Auto loans are a type of installment loan that divides the purchase of a car into monthly payments over a period of several years, which can make a new or used car more affordable. Auto loan terms typically range from 36 to 96 months, and the shorter the term, the less interest you will pay.

Understanding the true cost of a car loan is especially important now that average loan terms have increased, according to the credit reporting agency Experian. In the fourth quarter of 2019, the average loan term on new cars purchased was just over 69 months. Use our auto loan calculator below to find your monthly payment, your total interest charges, and the overall cost of your car.

Auto loan faqs

How much car can I afford?

Start by determining how much of your monthly budget transportation costs should be. A rule of thumb: keep your total auto expenses at 15% or less of your monthly take-home pay. So if you’re making $ 3,000 a month after taxes, your all-inclusive car expenses – including car loan payment, gasoline, maintenance and repairs, and car insurance – shouldn’t exceed $ 450. per month. To save money, take a look at auto insurance discounts you may be eligible for.

What loan term should I choose?

Avoid extending the term of your loan to keep your auto loan payment as low as possible. You won’t just pay more interest; you can also end up having negative equity, which means you owe more on the car than it is worth, for an extended period of time. Choose the shortest loan term you can manage while balancing other expenses like housing, savings, and paying off other debt.

What determines the APR of my car loan?

Your APR is largely based on your credit score, and the higher your credit score, the more likely you are to receive the most competitive rates. In the fourth quarter of 2019, borrowers with the lowest credit scores received an average APR of 14.25% on new auto loans, while those with the highest credit scores received an average APR of 3. , 82%, according to Experian.

What factors determine the total cost of a car?

When choosing a loan, the length of the loan and the APR you receive will determine the total amount you will pay. The same will apply to the deposit you pay and the money you receive for the exchange of your old car. You will also need to pay state taxes, title fees, and potentially dealer-specific fees upon purchase, as well as ongoing driving fees.

Where can I get an auto loan?

Several types of lenders provide auto loans, including car dealerships, major national banks, community banks, credit unions, and online lenders. You can get a particularly good deal from a lender you already have an account with, so check their rates first. Compare auto loan rates between multiple lenders to make sure you’re getting the lowest APR possible.

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