Get your car loan like a boss
by First Financial Bank

We all dream about driving in that perfect car, from the brand to the style. It all comes down to the look and the feel when you first get inside and put your hands on the wheel. The car you choose can say a lot about who you are. However, getting to this step can be a long, and hard process when you don’t know how to pay for it.

There are so many car loan options out there and unless you have someone to help you, finding the right car loan can become confusing. So here some tips that can help ease the burden of your car loan process.

Know your budget

Let’s face it, having your heart set on that perfect car will stay a dream if you can’t afford to buy it. Knowing your budget helps you determine what you can afford. When making your budget, you should also factor the cost for regular maintenance as well as any unforeseen issues. This way you won’t overspend, and struggle making payments for your loan.

The trick to budgeting is spending no more than 25 percent of your household income for all your cars. The monthly payment for your car shouldn’t be more than 15 percent of your monthly income.

Know your score

It is always a good idea to check your credit report. You never want to go into a negotiation without knowing where your credit stands. It can be confusing, but your credit score is your best asset. The higher your credit score, the better your chances are for paying less in the long run. There are plenty of consumer-reporting companies, but most companies use the major three consumer credit bureaus: EquifaxExperian and Transunion. All three credit bureaus can give you a FREE credit score and report.

Although your credit score can impact your ability to gain access to credit, it isn’t the only thing lenders will consider. Whether you have no credit or poor credit, there are ways to secure a loan through alternative lenders.

Does the “shoe” fit?

The average time people keep their cars is about six years, which is also about the average for a car loan. So, when thinking about what kind of car you are interested in, it all comes down to four different options: new, used, certified preowned, or lease. Your budget and preference will let you know which one is optimal for you to get. Everyone has their reasons for choosing one, but truly understanding the pros and cons of each will help decide what is the best option for you.

  • A new car means it comes with a warranty, and it has the latest technology, but it can be expensive, and the value will depreciate.
  • Used cars and certified pre-owned vehicles are similar, but used cars are usually less upfront, and have a lower insurance premium.
  • A certified pre-owned can still be more expensive, but it gives you ‘peace of mind’ because the factory backs it and it can only have a certain number of miles and a limit on the age.
  • Leasing can have a low-down payment, with a lower monthly payment and no upfront sales-tax fees, but there can be fees such as: excessive mileage penalties, early termination, lease-swap, wear and tear, and buyout cost.

APR vs. interest rate

Car loans can run from 36-72 months, which can help calculate how much you want to pay monthly. The Annual Percentage Rate (APR) is the cost you pay each year to borrow money, including fees, shown as a percentage. The higher the APR, the more you’ll pay over the life of the loan. The interest rate is the cost you pay each year to borrow money expressed as a percentage but does not include fees charged for the loan.

Overall, dealers and lenders are not required to offer the best rates available. So, save money over the life of the loan by negotiating for the interest rate and the lowest APR available to you.

The bank or the dealer

Financing through the bank/credit union, means you can get preapproved for a loan before you ever set foot in the dealership. They give you a quote and a letter of commitment to take to the dealer, which saves time when finalizing your contract. This also helps keep the car salesperson from trying to persuade you to include add-ons you don’t need. You can always apply for preapproval online or in your local banking center.

Getting a car loan will come from the bank/credit union or the dealer. So how do you figure out which choice is the right one for you. Financing through the dealer is like financing through the bank. The difference is that the dealer is doing the work on your behalf, filling out the credit application and submitting it to multiple lenders. This allows you to compare rates and terms to choose the best option for you.

Although it seems as if you’re getting the rate with the dealer, they may negotiate a higher interest with you than what the lender offers. So, you could end up paying more on the interest than your bank, which means that you would not be getting all the information to make the best decision.

When financing your car, always make sure you choose the option that is best for you. When you do the research and run the math yourself, you’ll walk away feeling good about the car and your financial situation.


First Financial Bank is not affiliated with any third parties mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving