Auto Loans

QInterest Rates On Car Loans Have Been Moving Up In The Past Few Months. I Don't Have A Large Down Payment Today, But On The Other Hand I Don't Want To Wait A Few Months To Buy A Car And Then Get Locked Into A Higher Interest Rate I'll Be Stuck With For Years. Should I Apply For Auto Financing Today Or Wait Until I Have A Larger Down Payment?
ADeciding when it's best to check into auto financing based on rates can be tricky. Of course, every one wants a low auto loan interest rate but a larger down payment may be more beneficial to you in the long run. First, look at what the likely difference is in rates between now and when you would like to finance your auto. If we're talking about half a point, you would probably be better off to wait. However, if it looks like the difference will be several points or more, it can make sense to lock in the lower interest rate now. Let's look at an example to see the difference. Assume you are looking at a $20,000 vehicle. Right now, you have a $1,000 down payment but if you wait you could have a $3,500 down payment. The following assume you will finance for 60 months: 6% with a $1,000 down payment = $367/month, $3,039 in interest 6.5% with a $3,500 down payment = $318/month, $2,639 in interest 8.5% with a $3,500 down payment = $338/month, $3,811 in interest. As you can see, your payment will be lower with the down payment even with a 2.5% increase in interest rates. However, you will pay nearly $800 more in interest with the 8.5% auto financing option. The answer to your question truly comes down to what you think interest rates will do. Do some simple calculations as I have above and decide what is best for you.