5MinuteAutoLoan.com Blog

If you are someone looking to buy a car and can manage to get approval, you may be toying with the idea of buying a used car, as against a brand new one. A used car seems like a great idea, because you pay less. However, getting a used car loan is not as easy as it used to be with the current squeeze on credit.

The value of a used car dips every year, so lenders charge high interest rates and present you with impossible terms and conditions. Moreover, with used car loans, you could end up paying much more than your car’s actual worth. It is a tricky situation and one that needs careful consideration before signing on the dotted line.

With fuel prices pushing $4 a gallon, “Hybrid-hysteria” has set in among commuters looking to beat the gas pump. People are grabbing fuel efficient vehicles and hybrid cars like the Toyota Prius, sending sticker prices on a spiral upwards by as much as $5,000. With buyers shifting away from gas guzzlers, small car sales seem to be picking up, but none can match the outstanding fuel rating of the Prius at 48 mpg (city). For most buyers, this car offers a combination of generous features, eco-friendly emission levels and fuel economy. According to several dealer websites, a year-old Prius with average mileage was now fetching more than it was new, at $28,000.

If you want to buy your dream car, but can’t afford the monthly installments that you need to pay off, would a car loan that stretches to 7 years or longer actually lower help with auto loan rates and monthly payments?  

At a meeting in February 2008, Toyota Motor Credit acknowledged reducing the consumer’s payments and boosting sales by extending 84-month/7year loans. According to Power Information Network, a unit of consultant J.D. Power and Associates GMAC, various credit unions also offer 84 months; and 0.1% of auto loans are for longer at 96 months to nearly 102 months; around 82% of auto loans range from 60 to 77.9 months.

With today’s credit scenario being what it is, most buyers take long loans to get the best auto loan rates and retain their vehicles for a long time period.

Source: USA Today

Most people drive out of a dealership with a shiny new car after agreeing to a car loan that’s actually too expensive for them. If you are in the market for a new car, it certainly pays to shop around, by taking time to read the fine print, understand the process, know about different kinds of auto loans and be smart about comparing rates. You should also get to know the pros and cons of each kind of auto loan.

The first kind of auto loan and the most common is a loan that has a fixed interest rate. This necessarily means that your interest rate will not change over the entire period of the loan, and you will be protected from any hikes in interest rates during the term. Variable rate loan has a certain amount of risk since the interest rate can change, but usually has a lower current interest rate than a five-year fixed-rate loan. Variable-rate auto loans will be based on the prime lending rate prevailing at the time.