Are you nervous about taking on debt for a new (or new-to-you) car? While it’s wise to avoid unnecessary debt when possible, it’s good to understand that there are several legitimate reasons why you might need to take on debt over your lifetime. Financing an unexpected bill, buying a home, or financing the purchase of a new vehicle are all respectable reasons to borrow money.
When most people gear up to buy a car, they often begin by deciding whether to purchase a new or used vehicle. Taking the time to consider the updated entertainment, design, and safety features of a brand new vehicle compared to the potential purchase price and slower depreciation of a used vehicle is wise, but so is understanding the differences in financing a new vs. used car. There are variances in the auto loans offered for new and used vehicles that should be weighed just as heavily as the look, feel, and price of your next car. Here’s what you need to know.
When most car buyers begin budgeting for the ongoing monthly expenses of car ownership, they typically consider the cost of vehicle financing and insurance coverage as the total cost of owning and operating a vehicle. Unfortunately, that approach fails to see the big picture. Did you know that, according to a recent study from AAA, annual car ownership costs can add up to an average of $8,469 if you drive 15,000 miles a year?
Buying a car is exciting—especially when you know what you want in a vehicle, you’ve found a dealership that has what you’re looking for, and you’ve established a general budget. While all of those details are certainly important, don’t make the common mistake of overlooking the financing piece of the puzzle as well.
If you’re one of the millions of people looking to buy a vehicle without unloading a significant amount of cash up front, here are the most common auto loan terms you need to know.