First car · Part 2 of 4
Compare the loan, not just the payment
Would a smaller payment keep you in debt longer?
Know what you are borrowing
Add tax and fees to the car price, then subtract your down payment. Here, $14,000 + $980 + $420 − $1,400 leaves $14,000 to finance.
Compare loan terms
$14,000 financed at 8% APR
48 months$342/mo
$2,405 total interest
72 months$245/mo
$3,674 total interest
The longer loan lowers the payment by about $96 but adds about $1,268 in interest.
Compare 48 and 72 months
A longer term lowers the monthly payment but adds interest. Compare both terms using the same loan amount and APR, then replace the example APR with your real offers.
Get offers before you sign
Get an offer from a bank or credit union before visiting the dealer. Compare its amount financed, APR, term, payment, and total of payments with the dealer’s offer.
Check the final contract for changed terms, fees, and add-ons. Preapproval does not guarantee the final loan.
Source: CFPB: Shopping for an auto loan