New Car Loans

New car loan costs depend highly on the amount borrowed and the interest rate. Although this might seem obvious, the fact is that you can use this information to discover either your monthly car loan repayments, or the time frame which you wish to take the loan. Both of these will be determined by the amount that you feel you can afford to pay each month.

The overall cost of new car finance is decided by the time over which you pay and the interest rate. You are able to use a car loan calculator to find out the cheapest way, as well as the best way according to what your affordable monthly repayments are. The monthly repayment amount is not of considerable importance to some people, while others find it to be critical, and in the latter case you can pay less each month by increasing the repayment term. However the overall cost of your loan in terms of both capital repayment and interest repayments will be higher.

It is usually true that the longer period over which you pay, the more interest you will have paid by the time you have paid off the loan. A car loan calculator can work that out for you, and let you know how much interest payable. However, you can lower the cost a new car loan by careful selection of the financier. Not all lenders are the same, so what should you be looking for?

First look for a lender that will give you a guaranteed fixed interest rate for the loan period, whether that be one or five years. Not all do this, however it is possible to come across lenders that will offer you this security. For the reason that your car is new you will be able to negotiate a secured car loan, with the car as security. This will generally permit you a reduced interest rate, and as a result the cost will be less than if your loan was unsecured.

However, there are hidden expenses in purchasing a new car besides the actual new car loan itself. If you have a secured loan, the financier will need the automobile to be consisstantly maintained and well looked after, and will require you obtaining a fully comprehensive auto insurance policy. This is because, should anything happen to the car, it will not lose value through you being unable to pay for repairs or even a replacement, depending on the extent of the accident.

You will discover that this is true of any secured new car loans, and this is a cost that you will have to be known of when making the decision of the size of loan that you can afford to repay. It more than uses up the benefit of the lower interest rate through the loan being secured on your vehicle, and could be an unfortunate burden if you are not aware of it and have taken the cost into consideration in your calculations.

An car loan calculator will enable you to determine the monthly repayments at a specific interest rate over a set interval, but this will not include the auto insurance. Still, there could be a way out if this means that you are unable to afford the loan you need. If you feel that you will be in better financial circumstances at the end of the loan term, then you could apply a balloon.

This is like paying a deposit on the car, but at the conclusion of the loan rather than the beginning. You state a sum to be paid in cash at the end of the loan interval, and that is taken from the amount of the loan. Your monthly repayments are correspondingly less, and you can afford the loan you need plus the comprehensive insurance payments. As you earn more money you can save up for the balloon payment at the end.

Most financiers offer this option, and it is a good one for those expecting an increased income during the term of the loan. In the event you can't afford the balloon payment, then you may have no option to either take out another loan to pay it or to sell the car to raise the money. However, it is a sound option worthy of consideration should you need more money than you can initially afford.

The cost of new car loans, then, is a combination of interest rate, amount you borrow and period of the loan, but you must also take the comprehensive insurance policy into consideration. The option of a balloon payment will allow you to cut down your monthly repayments, but not the over cost as you are still paying interest on the entire loan, balloon included.