Comparing the Value of Auto Loans

Shopping around to get the best rate for auto loans can save you money, but comparing offers may be a bit confusing. There are many different lending terms to become acquainted with in order to understand which loan is really the best value.

Here are some tips to help you to make auto loan comparison easier;

Up-front fees and charges-The description of these fees may differ depending on the lender some examples are; origination fees or processing fees, but what it really means is the total cost you are paying. Just add up the fees and charges for each loan, and compare them from that perspective, it makes the bottom line much clearer.

Annual percentage rate (APR)-This is the interest rate on the loan combined with all fees charged, and is simply the true annual cost of the loan. APR is expressed as a percentage of the loan principal, the rule of thumb is the lower the APR, the less you will be paying for the loan.

The total cost of the loan is the sum of all the monthly payments during the loan term, plus all fees and charges you will have to pay.  This factor provides a better comparison because it sums up everything you will pay over the entire duration of the loan.

In general, shorter loan durations are better.  A car depreciates quickly and will decrease in value considerably during the first two years.  Long term loans are more likely to end up causing you to have negative equity, being upside down in your loan, (simply meaning that you owe more on your automobile than it is worth).

Once you have learned how to compare auto loan offers and are ready to purchase your new vehicle, be sure to stop in at your local St. Louis Cross Keys Auto Center today and test drive one of our great used or certified pre-owned vehicles.