If you're in the market for a car, you likely know that the auto industry is steeped in myths. Auto loans alone are responsible for some whoppers, which is why we're taking some time to separate fact from fiction, and to give you some tips if you've fallen prey to some erroneous thinking.
I Don't Need a Big Down Payment.
Well, yes and no. Theoretically, you could walk into your Florida used car dealership with $100 and a pay stub and finance a $20,000 used SUV. But the more you finance, the more you're going to pay month-to-month, and the more you'll pay in interest long-term, which is going to make even a used car special not so special. Your best bet is to pay as much as possible so you're lowering your monthly payment and the overall cost of your vehicle.
Our advice: Already driving a car? Trade it in and apply the trade-in value toward your down payment.
The Monthly Payment is Low. Must Be a Good Loan, Right?
Not necessarily. Sure, if you're short on cash, you can get financing over a longer loan period (72 months instead of 60, for instance), which can lower what you pay from month-to-month. But that lower payment can be deceiving, since you're paying interest, and not just on the principle. The loan's interest adds up over time, and is added to other fees (loan origination, titles, taxes, et cetera), making up your APR. So while you might be paying less on a monthly basis, you're actually paying more money over the life of the loan because the interest is being charged for a longer period of time.
Our advice: Take the shortest-duration loan you can afford, since you'll be able to pay it off faster and can enjoy your car payment-free longer.
I Have No Credit History. How Am I Going to Afford a Car?
We hear you, and we can help. Not having a credit history doesn't mean you can't get a loan. It just means you need to build your credit, and a car loan is a great way to do just that. We'll work with you to find the right combination of vehicle and financing to work with your financial picture.
Our advice: Make those payments on time so your future lenders will see a borrower they can trust; it's a great step toward building your credit!
My Credit's Shot. I'll Never Get a Loan.
We won't sugar-coat this. Bad credit does pose some challenges, not the least of which are higher rates paid for loans. With that said, we work with multiple lenders, so we can give you a number of options. That gets you into the car you need, but it does something else that's important: it's a first step toward repairing damaged credit.
Our advice: Approach this as a clean slate. We'll give you the same advice we gave to the person above who's establishing their credit: make your payments on time (and watch your overall debt utilization) and you'll find your credit score climbing before you know it.
Won't a Car Loan Hurt My Credit?
There are three ways that a car loan can ding your credit. One of these is the “hard pull” that lenders use to determine your loan eligibility, which will briefly show up on your credit report the same as the inquiry for any other kind of loan, from a mortgage to a personal loan. Another is missed payments, but that's the borrower (not loan) hurting their credit. The last is the number of loans you've taken in a given period of time, since opening multiple lines of credit too close together will hurt your credit score temporarily.
Our advice: If you need a car loan, get it. Just make sure you're not taking on other forms of credit — new credit cards, payday loans, and the like — close to the time you need the auto loan.
One last piece of advice. If you live in Central Florida and you're looking for the best used car deals coupled with fair financing, call (855) 336-4650 or visit High Q Auto at 747 N. State Road 7, Plantation, FL today!