3 Things You Need to Know About Your Car Payment

Have you ever been in the market for a used car? If you have, like many people, you've probably found yourself confused. There are a lot of moving pieces when it comes to buying a used car. You have to take into consideration what you want from a car and how much you're willing to pay for certain features. You have to find a car dealership you can trust. And last but not least, you have to decide how you're going to pay for your beautiful new wheels!

A good used car dealership will handle many of these moving pieces for you. They can help you find a car you want using your criteria, or they can help you find financing. But it is helpful for you to have a good base level understanding of how car payments work before you even step foot in a used car dealership. We are here to arm you with knowledge! 

Before we get into the details, it's important that you understand that there are many variables that can affect your monthly car payment, so the information here is not one-size-fits-all. The information here is based on the average situation. 

So that being said, here are a few things you should know about how your monthly car payment will be calculated!

1. Your Loan Term will have a significant affect on how much you're paying each month. 
There are 5 common loan terms when it comes to used cars: 
  • 24 Months (2 Years) 
  • 36 Months (3 Years) 
  • 48 Months (4 Years) 
And the two most popular loan terms: 
  • 60 Months (5 Years) 
  • 72 Months (6 Years)
The reason that the 60 Month and 72 Month Loan Terms are the most popular is that the longer your Loan Term is, the smaller your monthly payments are going to be! 

2. For these Loan Terms, you will be paying $20 per month for every $1,000 dollars that you borrowed. 
Here is a simple example of what this looks like from a practical perspective: 
  • If you borrowed $10,000 for your car, your monthly payment will be about $200 per month. 
  • If you borrowed $9,000 for your car, your monthly payment will be about $180 per month. 
  • If you borrowed $8,000 for your car, your monthly payment will be about $160 per month. 
This is very simple math, and should help you determine whether a particular car will fit in your budget! 

​3. Some cars are not finance-able
Whoever is financing your new car is going to want to see value in their investment. What does this mean for you? It means that the bank needs to see that the used car you choose is in decent condition. Two things that could affect a bank's willingness to finance your car are the age of the car, and the amount of miles on the car. This is nothing to worry about as long as you choose a quality dealership. 

We hope you feel more confident in your search for a quality used car having read this article! The car buying process is not nearly as intimidating as it sounds, as long as you know what you're walking into. 

Thanks for reading, and stay tuned for more articles like this one from A-1 Auto Sales! 
Categories: Finance