The car-buying process can be an overwhelming one. Buying a new car is also considered one of the biggest financial commitments in a person’s lifetime, which is why it’s important to know the ins and outs of the vehicle finacing process. There are many frequently asked questions when it comes to car financing, so we have put together a quick guide to help answer anything you might need to know.
MSRP stands for the Manufacturer’s Suggested Retail Price; it is also referred to as the “sticker” price. The MSRP is the suggested selling price that carmakers give a new vehicle and is used as a starting price for dealerships. This number isn’t set in stone—in fact, it changes depending on the demand and the availability of the vehicle you are shopping for.
The rate charged yearly for borrowing through a loan is the annual percentage rate (APR). This is expressed as a percentage that reflects the yearly cost of funds over the length of a loan. The APR typically includes fees and additional costs associated with the transaction.
There are many factors that go into calculating an auto loan, including cost, credit score, down payment, the interest rate and length of the car loan, as well as whether the vehicle is new or used.
If you go somewhere besides the dealership for a loan, bring information about the vehicle you’re purchasing, as well as general personal information, proof of income, and credit history.
Some buyers choose to finance their vehicle through the dealership. This is convenient as it consolidates all of your negotiations and all steps of the process into one location. However, you may want to shop around at other financial institutions, such as a bank or credit union, to see if you can get better rates.
A good rule of thumb is to factor 20% of your income towards the cost of your vehicle. However, it’s a good idea for you to sit down ahead of time and calculate how much of your monthly income you’re willing to give up for monthly car payments.
It depends on how bad your credit score is. Oftentimes, buyers with low credit scores can still be approved for a loan, but won’t have access to good rates or will have to settle for a lower loan amount.
If you have any other questions about purchasing a vehicle, feel free to contact Gossett Volkswagen Germantown, finance department. We’re happy to help!