Charlotte Metro Federal Credit Union Blog

In your search for cars and considering auto loans, you may be asking, “What are all the costs included in buying a car? How much should I have saved up before financing?  What goes into my monthly car payment?”

Hold the phone… Are you coming up on your last car payment or recently made your last one??  Congratulations! I know you're ready to say “I officially own my vehicle!” 

Buying a car from a private seller can be a scary and nerve-wracking process simply because, as the buyer, you have to do most of the work. Unlike dealerships, the seller won’t offer coverage for the car they’re selling and the sale is final. It's up to you as the buyer to ensure the seller is keeping up his or her end of the deal in selling a trustworthy car.

Picture this - you're doing some car shopping and just found your perfect one that has your unique style written all over it.  The car salesperson approaches and says  “Is this the one?! Let’s get you set up so you can drive home in your new car today!” What’s your next move?  Are you rushing to submit an auto loan application or are you going to do some research for the best places to get an auto loan? 

Deciding how to pay off an auto loan isn’t the same for every borrower and it varies based on your spending needs. One borrower may opt into doing a monthly payment plan to establish their credit score, while another might decide to pay the total cost of the auto loan in advance and avoid paying interest. 

As an adult, you have a credit report that summarizes how you've handled your credit accounts which are reviewed and scored. Think of it as your credit report is your new report card, and your credit score is your new GPA. A negative inquiry or delinquency on your report can drastically lower your credit score. This can take time to restore which you might think will ultimately put a hold on many parts of your life, like financing a car.

When applying for an auto loan from a lender (like a bank, credit union, or even a dealership) you're likely to hear about interest. Interest on an auto loan is essentially the extra fee you pay for using the lender's money to buy a car. Luckily, the interest you'll accrue (and eventually owe) on your loan is spread out over the life of your loan, so you're not required to pay the fee back all at once.

Need a stress reliever in this car buying process? You may want to look into getting pre-qualified on an auto loan through your preferred lender. Better yet, look into joining a credit union to get pre-qualified since credit unions typically offer better rates other lenders may not.

What are your initial thoughts when you hear or see the words "no payment needed" for an auto loan...?  Is it a relief to hear that you're not forced to come out of pocket to pay a percentage of an auto loan that's already thousands of dollars? Or do you think it's a trap for you to eventually default on your loan because you failed to put 20% down?