Auto Loans

Many auto financing and loan companies allow you to apply online or over the phone.
Whether you're looking for a loan for a new or used car, or possibly looking to refinance an existing
loan, you may be able to save hundreds or thousands of dollars by applying online.

One advantage provided by online lenders is the speed of application approvals. You can apply online
and often receive approval in less than a day. Upon approval, lenders will often send you a check that
you may use to purchase your new car. Read on for important auto financing tips.There are many
advantages to applying for auto loans online. Online auto financing companies will let you know in a
matter of minutes whether or not you've been approved for an auto loan. With a large selection of auto
lenders to choose from, finding your best financing rates and terms is easier than ever.

How Much of Your Car Should You Finance?
Before you begin looking for a new car, you should know your limits and what you should be spending.
Experts say you shouldn't spend more than 10 percent of your gross income on car expenses, which
includes the cost of the car along with insurance, gas and maintenance.

Once you've been approved for your auto loan, you will receive a blank check voucher within one
business day. Applying for auto loans can't get much easier than that.

Auto loans are considered secured loans.  Review your expenses and then confirm the amount that you
can afford for a monthly payment by figuring your dept-to-income ratio. A good ratio in the 36 to 42
percent range will most likely get Auto Loans approved.

How much should you spend on a new vehicle? The experts agree that you shouldn't spend more than
20 percent of your monthly income. This figure should include payments on all the cars you own,
whether you have one vehicle or more. Also, the 20 percent should be on your net income not your
gross income. 

Even if your home is paid for and you have few monthly bills, the basic rules still apply.

To calculate monthly payments, you should factor in the purchase price, the down payment, interest rate
and the term of your auto loan. All this will affect how much vehicle you can get for your money. If
interest rates are low, you can buy more car to fit under your monthly payment limit. You may be able to
afford a better vehicle when interest rates are low.

No down payment on your vehicle?
Whether or not you decide to make a down payment will also affect the size of your monthly loan
payment. In the past, you almost always had to make a down payment -- it was like a down payment
was proof you could afford to buy the car. Now, down payments are almost optional. Car companies
and dealers are so anxious to sell cars that they don't want the stumbling block of a down payment to
stand in the way. So, the more down payment you provide, the more car you can afford and still be
under your 20 percent limit.

Other important considerations
At the same time, you should keep in mind the amount you can truly afford and that often depends on
more than just the purchase price of the vehicle: Insurance rates, fuel costs, maintenance, and repair can
play a major role in determining how much you can afford. 

Although you should keep the 20-percent rule firmly in mind when deciding which car to purchase,
make sure you consider the other factors that will affect the overall cost of owning and driving the
vehicle.

Financing your car needs as much research and homework as picking out the car.
Seven out of 10 new cars and trucks are financed. You can get an auto loan from a bank, credit union
or other financial institution. You can have these loans approved before you ever hit the showroom (a
major plus in most deals). These sources of financing will usually offer the lowest rates you'll find, and
credit unions tend to be lower than banks.

You can also get financing through the dealer or from the auto manufacturer. It's possible that
dealer/manufacturer financing will cost you a bit more, but it isn't written in stone. There will be
occasions when a dealer will actually give you the best deal.

Interest rates on new cars are lower than on used vehicles. And, in general, new cars can be financed
over longer terms than used ones. This can make a new car less expensive than a used one in many
cases.

Profit in financing how dealer financing works:
Dealers will often paint a low price on the windshield, and then make their money back when they
finance the car. Sometimes, dealers offer very low interest rates for specific cars or models, but then
they won't come down a penny on the price. Or to qualify for that rate, you'll have to pay a larger down
payment. You might find it a better deal to pay higher financing on a low-price car or you may go for a
vehicle with a low down payment.

Length of auto loans
Also keep in mind that time is money when it comes to financing -- meaning that the longer your loan
term, the more it will cost you.

The Loan Guide provides access to free Auto Loans information.