Are you planning to buy a new Jeep® Cherokee but don’t have to money to make it happen? With an auto loan, you can borrow money from a lender to purchase your vehicle. The money lent to you can then be repaid through monthly payments for an agreed-upon period. We will discuss the three most important things you need to know regarding auto loans: down payments, loan terms, and interest rates.
A down payment is the amount of money you can spend on a vehicle. This lowers the amount of money you need to borrow, allowing you to get better terms on your loan. If you want to buy a car worth $30,000 and have $10,000 to shell out, you will only need to borrow $20,000.
Loan terms are the amount of time it will take you to pay back your loan. Usual terms are around 36 to 72 months. While long-term loans may be tempting with their relatively lower monthly payments, you end up paying more money in the long run because of bigger interest rates.
You would think that borrowing $20,000 would mean paying back the same amount, but this is where interest rates come into play.
Interest rates are different for each borrower and are calculated based on your credit score, credit history, down payment, loan term, and the vehicle purchased.
So how does interest affect payments? Taking our previous example, if you’re $20,000 loan is payable in 72 months with a 5% interest rate, you’ll end up paying back a total of $22,645.
If the topic of loans and financing still confuses you, then let John Greene Chrysler Dodge Jeep® RAM help you out. Contact our finance department at our car dealership in Morganton, NC, and we’ll help find a payment plan that works for you.