There’s a lot to consider when buying a car. A number of decisions regarding the financial aspect of purchasing a car can be stressful. Here we take a look at some of the factors that go into getting an auto loan.
Most lenders care as much about your credit history as they do about the actual number of your credit score. This is especially relevant for those that have credit that is less than perfect. Lenders will specifically look at your payment history on previous auto loans and if you have a good auto loan payback history, even if you’ve missed payments on other items you might still get a loan with a reasonable rate. Lenders gauge your financial responsibility, history, and reliability when assessing whether or not to approve a loan.
The size of the down payment you’re going to put down is important and many lenders will require one. The amount is usually determined based on your credit history and credit score. In addition, paying a larger portion of your auto loan via a down payment may earn you a lower rate.
It’s important to keep in mind that not every vehicle is financeable. Older model year vehicles and those with high mileage may have higher rates or not be financeable at all, this is because they represent a higher risk to the lender. Lenders usually consider something called LTV, which stands for the Loan to Value. This is the size of the loan vs. the value of the vehicle (as determined by the lender, usually using industry standard values like Kelley Blue Book or Black Book). This caps the size of the loan; the better your credit, the higher the loan to value the lender will be willing to go.
The process may appear complex, but armed with knowledge is the best way to come out a winner. Check out additional information on how to finance a used car here.