Dramatic Increases in New Car Borrowing
In the financial world there has been a marked increase among American financial companies. Not just the number of people getting involved in new car borrowing, but also the amount of money being loaned. The amount of money for new car borrowing has been steadily climbing over the last few years.
Analysts point to the fact that the newer models are being released with a lot higher price tags than before. Luxury and standard vehicles are getting more bells and whistles added to the price tag. Trucks and SUVs are the most popular categories of new vehicles and have an average price around $30,000.
How Increasing Loans Affect the Consumer
It paints a pretty clear picture for consumers. If you want to own a new vehicle, 95% of the population require a car loan in order to purchase. The average American cannot walk into a new car dealership and pay for a new vehicle in full. Even with a third or quarter of the total price as down payment. There will be a hefty residual balance that requires a loan to cover it.
What you end up paying monthly can also vary widely depending on interest rates, even more so than the down payment.
Credit Rating vs New Car Borrowing
When you are considering a new car and the possibility of applying for a loan. You need to consider how much your final monthly payments will be including the interest. For example, if you have a high enough credit score, which for most is around 680, that means you can get about a 5% interest rate.
For example, on a truck that has a total cost of $30,000 and a large down payment of 20% or $6,000 with a 36 month term, you will still pay almost $2,000 in interest alone. Now, if you have a premium scoring of around 740, the rates can drop to around 3%, which would mean with the same numbers, you would only end up paying a little over $1,100.
Although your credit score greatly affects your interest rate.Thus your payments, the amount of your down payment also determines the amount of interest paid in total and the monthly payments.
As you use the reference calculators and scales, you will be able to get a good picture of the impact your credit score. As well as a down payment has on your payments. It is only logical that if you start off with a lower balance, the amount added by interest will be less.
Try to save up as much as you can before applying for a new car borrowing loan. From there have a set figure in mind as a limit to how much you are willing to spend for your vehicle, both in total and monthly. This will help eliminate any surprises and will give you more control over getting the best deal possible.