Buying a car has only become more complicated over the decades. In the 1970s, you'd walk onto the lot, pick one that you liked, and you'd pay a good chunk of the bill with your savings and only finance a small portion of the cost with a loan. In a lot of cases, that wasn't even necessary. Today, most people won't be able to cover the cost through savings alone. In fact, they may require a loan to even make the down payment. Since owning a car is costly in itself due to gas prices and maintenance, it is vital to choose a loan that offers fair terms while pushing you to pay off your vehicle in a reasonable amount of time.

Determine What Kind of Payments You Can Make

The average auto loan lasts between 24 and 84 months for new cars and 48 to 60 months for pre-owned vehicles. Loans that require higher monthly payments often come with lower interest rates, and they enable you to negotiate a lower down payment than you would otherwise have to pay. This allows you to put a lot of money down and pay it off within one or two years. In all likeliness, you'd own the car free and clear before you would had to make any major repairs.
Long-term loans can be difficult to secure. You'll almost never be able to get an 84 month term unless you are buying a new vehicle that's over $25,000, and you have an immaculate credit score. This works out because a loan that takes that long to pay isn't generally in your best interest. You will end up paying far more than your vehicle is actually worth, and you'll probably need to trade it for a different model almost as soon as it's paid for. In short, the longest loans could easily put you in a perpetual debt cycle, and you'll want to avoid that if it is at all possible. Always try for a loan that will take five years or less to pay.

Calculate the Cost of the Actual Vehicle

The price you negotiate with the car dealership isn't the entirety of what your car will actually cost you. You will want to look at the cost of tags, licenses, taxes, and other documentation fees. Once you have a firm estimate in hand, deduct it from the EMIs and other fees to calculate the total cost of your loan. This is an excellent system for determining the actual value of the financing options on offer, and it will help you choose the most cost-effective car as well.

In Conclusion

The best kind of loan you could possibly secure is one with a low pre-payment penalty as well as a low interest rate and low processing fees. The availability of such a loan will depend greatly on your credit score and the car you're trying to acquire. It's possible to find a loan with a 10 percent interest rate and only costs 20 percent more than the total amount borrowed. If you are in a position to do so, look for something comparable to that. If you have bad credit, going for a cheaper vehicle that you can pay off quickly will allow you to bargain for a much better price and rate than you would be able to get otherwise. You may not always get your dream vehicle out of the deal, but there is always a way to get a manageable loan.

Craig Patridge is a car enthusiast and freelance blogger who writes about how to finance a new car. If you need a loan for your purchase, Craig recommends using a loans calculator. You can also click here for more info to find out about the loans available to you.