Financing 101 in Auburn, NY

Auto Financing at Fox Honda

Choosing to purchase a vehicle is fun, but researching which auto loan you need can be difficult. This is why our team at Fox Honda has created a guide to help you choose which finance agreement you need. So, before you sign the dotted line, check out these helpful tips so you feel confident in your choice.

What Is Auto Financing and How Does It Work?

When you're purchasing a vehicle, it is common to borrow money from a credit union, lender, or bank. Auto financing is when you borrow money and make monthly installments with interest until it's paid back. At its core, auto loans include elements like conditions, loan terms, and interest rates.

Conditions: List of terms and conditions that the lender and borrower agreed upon. The conditions also list penalties if a payment is missed.

Loan Term: The set amount of time that the borrower has to pay back the money.

Interest Rate: A percentage that represents the costs of borrowed money.

Types of Auto Financing

Some of the most common types of auto financing include:

• Unsecured Auto Loans: Your credit score is used to determine your rates, which are typically higher. This auto loan is ideal for buyers with poor credit scores.
• Auto Refinance: The act of replacing your old loan with a new one. This is common if your credit score improves and can also help pay off the old loan.
• First-Time Car Buyer: This loan helps first-time car buyers and could have benefits like lower interest rates, lower down payments, and waived application fees.
• Lease Financing: This is like renting a car for a set amount of time. Once your agreement is up, you can decide if you want to buy the vehicle, return it, or start a new lease agreement.
• Secured Auto Loans: Lenders use collateral like your vehicle, so if you miss a payment, they repossess your vehicle.

Factors that Affect Auto Loan Rates

Aspects that can affect your auto loan include:

• Down Payment: The more you put down a vehicle, the lower your interest rates will be. This is because you'll be financing less.
• Loan Term: Your loan term can affect your interest rate, so if you have a shorter term, your interest rates will be lower. Shorter terms mean higher payments, but you'll inevitably save money in the long run.
• Credit Score: If you have a higher credit score, your interest rates will be lower, but you also have to consider your income and the debt-to-income ratio.
• Age of the Vehicle: New vehicles are considered less of a risk than older vehicles which means their rates will be lower.

How To Compare Auto Loan Rates

Take the time to contact several different lenders and compare interest rates and their terms. You'll also want to consider the annual percentage rate (APR), which includes interest rates and other loan costs. Taking time to compare rates can help save you money.

How To Determine Your Monthly Budget

Knowing how much you can afford when it comes to a new vehicle is important. It's recommended by finance experts to spend no more than 15% of your monthly income on insurance, transportation, and car payments.

To determine how much you can afford, you must first figure out your monthly net income, which is how much you take home after health insurance and taxes. Create a short list of vehicles you're interested in and figure out fuel and insurance costs. Take that number and subtract it from your monthly net income, which will tell you how much you can spend on a monthly car note.

Your preferred insurance company can provide you with a quote if you need help figuring out the cost of insurance.

How to calculate estimate fuel expenses

1. Multiply the average number of days in a month (30 days) by the average distance you commute.
2. Divide that number by the mileage of the chosen vehicle.
3. Multiply that number by the current price per gallon. To account for fluctuations, add an extra dollar to the price per gallon before multiplying.

How to Apply For Financing at Fox Honda

If you're thinking of applying for financing, then our expert finance team can help you every step of the way. You can fill out our secure online financing application by filling out information like your employment and income. Our team will review the submitted form and contact you to discuss your finance options. If you have any questions, don't hesitate to contact Fox Honda or swing by our dealership located at 320 Grant Avenue, Auburn, NY, 13021.