Cars are essential for most families. Cars allow us to drive to and from work, get food, and travel. Even more important than having a car, in general, is having one that is reliable. Many people want to purchase a new car or one that is only a few years old, as these tend to be more reliable and may even have warranties.

However, paying for a brand-new car with cash is not an option for most families. One way to pay for a new car is to finance it through a loan. Many people often ask, “Where can I find the best loans near me?” In this guide, we will go over everything you need to know about getting auto loans in Tyler, Texas.

Deciding Whether to Finance a Car

When you decide that it is time to get a new car, you must determine whether you will finance the purchase or buy it outright. Many people don’t have enough cash on hand to buy a new, reliable car outright. Most people will use some type of financing when purchasing a new vehicle.

When deciding whether you will finance your car purchase, you will need to consider a few factors to make sure you can afford the purchase. Some of these considerations include:

  • Is the price appropriate? Do some research about the car to find out if you are paying the right amount for the vehicle. You don’t want to overpay. If you get a bad deal, then you won’t be able to get a good trade-in deal when you get your next car.
  • What is the trade-in value of your current car? This number will determine how much your loan will be for your new vehicle.
  • Can you afford the monthly payment? Once you determine that this is the right car and know what your monthly payment will be, you will need to make sure you can afford it.

Deciding to finance a car takes a lot of thought and planning. We will go over everything that you need to know to help you navigate the process of getting auto loans in Tyler, TX.

Three Types of Auto Financing 

Once you have decided to finance your car, you need to understand the options available to you. You can take out a traditional auto loan, refinance your existing loan, or lease a vehicle. We will go over each of these options in detail below.

Auto Loan

A traditional auto loan is what most people think of when talking about financing a car. With this type of auto finance, you take out a loan for a new or used car, then pay back the loan with a monthly payment. Your monthly payment will include money that pays down the actual cost of the vehicle as well as interest on the loan.

Refinance an Existing Loan

Another financing option is to refinance your existing auto loan. If you have been keeping up with payments on your loan, there is a chance that you could refinance your loan to lower your interest rate and monthly payment. You will want to do this at a time when interest rates are low.

The advantage of this option is that it can free up some money in your monthly budget. You can use this to finance another loan or for a different purpose.

Lease

One last option for financing a car is to lease it. When you lease a vehicle, you agree to a specific yearly mileage that you put on the vehicle, and your monthly payments don’t go toward ownership or equity in the car. Car lease payments are usually lower than a monthly loan payment, so this is a good option if you don’t have a ton of room in your monthly budget.

When you lease a car, you can usually get a lease buyout loan to help you purchase the vehicle you are leasing.

Costs Associated with Financing 

When shopping for an auto loan, there are several terms that you should know. You should consider the following factors when shopping for an auto loan, as they indicate costs added to the total price of the vehicle.

  • APR. The Annual Percentage Rate refers to the cost of borrowing money from that Tyler auto finance lender. The APR is a percentage of the borrowed amount. The APR usually includes the interest rate and other fees. This total is the most important number when comparing loans and figuring out exactly how much you will pay throughout your loan.
  • Interest rate. This percentage refers to the amount of interest you will pay on your loan. The interest rate is a percentage of the total borrowed amount. The interest rate will usually be lower than the APR since the APR considers the interest rate plus other factors.

Factors That Impact Interest Rate

Many factors determine the interest rate on your Tyler auto loan. When figuring out the terms of your loan, consider these factors and adjust them until you receive an offer for a reasonable interest rate.

Down Payment

As with any type of loan, you will most likely need a down payment for your auto loan. In general, the larger the down payment you offer, the lower your interest rate. If you find that all of the loans provided to you have higher interest rates, consider saving up for a more significant down payment to see if that brings your interest rate down.

Payment Period

One factor that determines the terms of your loan is the length of your payment period. If you have a short-term loan, your payments will be larger, but your interest rates will be lower. You will also be paying off the car faster. If you opt for a long-term loan, you may have lower monthly payments, but you will likely end up paying more in interest over time.

In general, if your monthly payments are low, you are likely paying more for the car over time than if you made fewer large payments.

New Or Used Car

When shopping for a car, you generally have the option to buy used or new. Generally, used cars are more affordable. However, it can be hard to secure a loan for a used car. This difficulty is because cars depreciate quickly. If the person defaults on their loan and the bank seized the vehicle, they could not sell it for as much money as a newer car.

It is much easier to secure financing for a new car, though the overall price will be lower.

Credit Score

Ultimately, your credit score is the most crucial component when determining the terms of your auto loan. Tyler auto finance lenders use a person’s credit score to determine their reliability and determine interest rates and APR based on that score.

You will be much more likely to receive lower interest rates if you have a good credit score, even with a small down payment and a long-term loan. If you have a poor credit score, you must have a sizeable down payment and the ability to pay for a short-term loan. Otherwise, you may end up overpaying for your car.

Call Us Today 

If you are interested in an auto loan, you can apply for one through Kelly Community Federal Credit Union in Tyler, TX today. We will be happy to discuss your Tyler auto finance options with you. Call us today at (903) 597-7291. You can also use the auto loan calculator on our website to get started with the process.