Car financing requires careful planning to avoid high interest or payments that exceed your budget. You always need to thoroughly read your financial agreement to avoid outrageous terms and conditions with your finance provider. Once you sign the loan agreement, you’re bound by the contract.
More importantly, new and used car financing has different repayment options that will determine the amount of time it takes to pay off a car loan. Learn the difference between new and used financing below.
Understanding New And Used Car Financing
New Car Financing
The average new vehicle is $30,000 with at least $5,000 in interest at 4.21℅. Thus, you’ve actually paid $35,000 for the car, but most people finance a new vehicle with a loan. The time it takes to pay off car financing depends on your income and repayment schedule. Most people pay off their new car loan in 72 months. If you make a few extra payments towards your car loan, it can be paid off sooner.
Used Car Financing
A used car loan is slightly less than a new car loan. Many people that finance a used car often find themselves paying off their loans in an average of 60 months. Negative equity must also be factored into a used car financing plan because it can increase your payments and the length of time it takes to pay off the loan.
Negative equity is the amount of money owed on an existing car loan and transferred to the used car loan financing agreement. The same is also true if you have a trade-in on a new car loan.
Careful research and planning are very important before you sign a financing agreement on a new or used car. With the right budget and on-time payments, you’ll have the loan paid on a reasonable repayment schedule