7 Important Things to Know About Auto Loan Rates

If you’re looking to buy a new or used car a good time to understand auto loan rates is before you head to the dealership. A basic understanding of how loans work can help you find the vehicle that is right for you.

How do auto loans work?

Auto loans can be used to purchase a car, truck, SUV, van, or crossover. If you’re looking to buy a new or used vehicle and you don’t have enough money saved to buy it outright, you will need to purchase it through an auto loan. If you have some money saved or are trading in your existing car, you can use this money to put toward your new car and get a loan for the remaining balance. You will pay off the balance of the loan by making monthly payments to the lender until your car is paid in full.

One important thing to understand about auto loan rates is the relationship between the interest you pay and the term of the loan. The longer the term of the loan your monthly payments are lower, however, you will pay more interest. So, it is important to find a balance between loan length and monthly payments.

There isn’t a one-size-fits-all way to determine the best car loan. That’s why you need to take the time to understand how auto loans work and make the right decision for your financial situation.

How much will I pay per month for my car?

There are three primary things that will affect your auto loan rates. The annual percentage rate (APR), the term of the loan, and the amount you borrow. A few examples of how these factors impact your monthly payment:

• Loan amount. Let’s say you are car shopping and looking to buy a vehicle that costs $32,000. You currently have a car and the dealer is willing to give you $3,000 for your trade-in. Your total loan amount would be $29,000 instead of the full price ($32,000). Trading in your vehicle will have a small impact on your monthly payment by lowering your loan amount. However, trade-in values are normally considerably lower than if you sold your vehicle privately. If you are able to be patient and want to take on private sales, you should consider it. 
• Annual percentage rate. You will often hear the term APR when talking about car loans. The APR is the annual percentage rate. This is essentially the interest rate you will pay on your loan. With a lower interest rate, your car payment will be lower. Additionally, you will be able to pay off your loan faster with lower interest rates. 
• Loan term length. This is the amount of time you have to pay back the auto loan. The shorter the loan length, the less interest you’ll pay over the life of the loan. Conversely, if you elongate the loan terms, you’ll pay more in interest but your monthly payments will likely be lower. Ideally, a short term loan with a lower interest rate is the best option.

One quick way to look at how these factors will affect your payment is to use our loan calculator. You can put in your loan amount, auto loan rate, and loan length and see how much your payment will be. Testing different numbers in each of these areas will help you see what you can afford.

Focus Federal Credit Union has loans available for both new and used cars. We will work with you to develop options that fit your budget and financial goals. We also offer a variety of refinancing options if you are looking to reduce your current monthly auto payments.

.

What is a good interest rate on an auto loan?

Interest rates vary by person but there are a few steps you can take to improve your options:

1. Improve your credit score. Your credit score will have a large impact on your loan. To improve your credit score, pay your outstanding loans and debt on time and in full. If you have credit card balances pay those down and limit opening new credit prior to applying for a car loan. Meet with one of our financial representatives to create an action plan to improve your credit situation. 
2. Choose a car that meets your budget. When shopping for a car keep your budget in mind and don’t buy a vehicle that is out of your price range.
3. Consider a shorter loan term. Longer loan terms mean that you pay more in interest over the length of the loan. If possible, try to pick a shorter loan term to limit the finance charges you pay.
4. Put money down. If you have money to put down on the loan this will reduce the overall loan amount.

Can I get a loan if I don’t have perfect credit?

Perfect credit isn’t a requirement of an auto loan. However, you will want to find a lender that will work with you to get your financial goals back on track. Focus Federal Credit Union offers the Fresh Start Auto Loan Program which helps you purchase or refinance your car while rebuilding your credit.

To apply for the program, you need to be currently employed and be able to provide your direct deposit paycheck information – if applicable.

What are the current auto loan rates?

The length of your auto loan can vary. Focus Federal Credit Union offers options for up to 120 months. You can find our current rates here. 

1.95% APR is one of the lowest loan rates you can get currently. Remember, lower loan rates and shorter terms are ideal if you are in the position to be approved. One of the biggest consequences of choosing a long term loan is that you can often end up “upside-down” on your loan. This simply means that, because of the length of the loan and the interest rate, you now owe more on your car than the car is worth. An additional upside to a shorter-term loan is that the resale values tend to be higher. Because the car is newer, likely has fewer miles and less damage, which translates to higher resale value.

How do I apply for an auto loan at Focus Federal Credit Union?

Getting a car loan at Focus Federal Credit Union is simple, there are no fees and an easy online application to get the process started.

You will need to have the following available:

• Proof of income (W-2, pay stub, alimony documentation)
• Proof of assets (bank statements and financial account statements)
• Employment verification
• Driver’s license information

This information helps us get a picture of your financial situation and will make it easier for you to be approved for a loan. But don’t worry, we have auto loans for everyone. 

How do I find a new car?

If you are ready to go car buying Focus Financial Credit Union offers easy and convenient connections to car dealers throughout Oklahoma. Our Auto Smart option allows you to get approved for a loan, find your vehicle, and purchase without all of the hassles of visiting a dealership. Have questions or concerns about purchasing a new vehicle? Contact one of our representatives today!