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Finding The Best East Coast Auto Loan Package

For most of us in Philly, financing a car purchase is the only option.  After all, cars cost a good deal of money, more than most of us have in the bank.  Paying over time comes with an additional burden, however, and that burden is accrued interest.

Lenders want to make a profit when they extend credit, and they do so by charging a fee for lending money.  The rate at which they charge interest goes a long way in determining just how much you will pay to actually buy the car of your choice.  Here are some important things you need to know in order to hack your way to a better interest rate on your car loan, especially if you are currently burdened with high interest payments and wish to get a lower rate.

Calculating Your Interest Charges
Three things determine the final amount you will pay when you buy a car and finance it.  These are the loan amount, the loan period, and the interest rate.  The higher the loan amount, the more you will pay each month.  The longer the loan period, the lower your monthly payment will be.  The higher the interest rate, the more you will be charged as a fee each month on your outstanding balance.

Although this sounds pretty simple, the actual numbers will vary when each of these factors are taken into consideration.  The important thing to remember is that all three factors MUST be taken into consideration because all of them apply to every single loan package.

If you feel you are paying too much interest on your existing car loan, consider refinancing.  Most likely, refinance lenders will offer a better rate because you have already demonstrated a good payment history on your current loan.  Use an auto loan refinance calculator to see how much you can save.

Most finance companies have an online page that includes this type of calculator.  Enter the balance on your current loan, the interest rate charged for each loan term offered, and view the results.  Remember, the longer the loan term, the more payments you will have to make, meaning that interest will be charged more often than with a shorter term loan.

Choosing The Best Package
Car payments on an auto loan are amortized.  This means that although the amount of interest due on the monthly payment changes from one year to the next, the amount paid each month stays the same.  In other words, early on in the loan period you are paying more interest and less principal, and the reverse is true toward the end of the loan period.

If you are considering refinancing your current balance, ask yourself how much you can afford to pay each month and use the loan calculator to see the total amount of interest you will pay for each loan period offered by the finance company.  With a shorter loan term, you may have to pay a bit more than you want, but you will pay off the car faster and save money in the long run.

Show The Results To Competing Lenders
As a rule of thumb, you can't get what you don't ask for.  If you purchased your vehicle with an in-house loan from the dealer, show the new loan offer to them.  They might be inclined to lower their own interest rates just to keep your business.  Even when discussing packages with a lender you have contacted via the Internet, offer to show them what another lender has promised you.  You might be surprised by what happens next.

Consider Depreciation
Another important factor to consider is what the vehicle will be worth in two or three years.  Will you be able to sell your car at a price that is greater than its expected value?  In other words, how long do you plan on owning the car?  Remember that you can always get a better deal when you sell your own car rather than trading it in.  Dealers generally do not offer you a lower interest rate in exchange for a lower trade-in value.  It would be nice if this was the case, but it isn't.

Therefore, it is extremely important to know exactly how much you will pay each month on your car loan, and even more important to come to a decision on how many months you want to make payments.  In the end, you will save money on any car loan package if your choose slightly higher payments on a shorter loan term.  Lenders generally offer lower interest rates if the term is for a shorter amount of time.  The three factors mentioned earlier will work in your favor, and this applies to new cars as well as to refinance packages. 

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