Car Lot Finance

Car Loan Rates

Car loan rates are a tricky thing to understand. On one hand, it seems very simple: the extra money you’re paying in order to borrow enough to pay for your car now. Seems like an easy enough concept. But then you have to factor in how many different things go into actually determining that rate, figuring out how you go about getting it, and what sorts of tricks might raise it or the pricing in general. Let’s look at just a few of those things.

The first thing to understand about car loan rates is that they are higher the older the vehicle is. This is for two reasons. The first and more obvious one is that the newer a car is, the higher the initial price is. That’s often referred to as the “principle” of the loan. The higher that number, the lower the interest rate can be and still make money based on that first number. The other reason is that the bank or other lender is not just taking a chance on you, they’re taking a chance on the car itself, that it won’t break down or have a problem that will cause them to lose out on money, so they have to up the interest rate in order to make sure they’re secure in their investment.

And speaking of taking a chance on you, car loan rates can fluctuate based on your credit score. In case this wasn’t entirely obvious as well, your credit score affects how much trust is put into you by lenders. Some of them simply won’t take the risk that they may not get their money back on that person shopping for used cars Charlotte NC, but some are willing to make that leap so long as they can get the majority of their investment back as quickly as possible. Higher rates may be difficult to deal with, but they are least will help improve your credit score for later loans that you may need.

One thing to watch out for is that loan officers, especially at dealerships, often work on commission, so they may attempt to up sell you on various goods and services after you’ve already agreed on a price. This will also affect how much interest you’re paying since it effectively increases the principle. While some of the things offered may be good or useful, you should be careful that you aren’t purchasing useless things or even too many extras after you have a quote.

There are more things that may cause your rates to change, but ultimately if you take the time to see what is available and make a sober judgment of your own credit score, you should end up with some excellent car loan rates.