Choosing Your New York Auto Loan Term
When shopping around for a car loan, there’s more to choosing the best than simply finding the lowest interest rate. While there are plenty of competitive New York auto loan rates, you won’t get the most value out of your car purchase unless you also decide upon the best loan term length as well. Here’s a look at some of the more common auto financing terms and how they affect your loan.
What Is the Term Length?
All loans, auto and otherwise, must be repaid according to an agreed upon term. The term is the timeline over which you’re expected to pay back the loan. So at the end of the term, the loan is done with. Different lengths correspond to different interest rates and monthly payments, so agreeing on the appropriate term length for your auto loan is very important.
36-Month Auto Loans
Generally, this is the shortest amount of time most people will take on a loan. The advantage to a short-term loan is you reduce the number of interest payments you make since there are fewer months to pay the loan back. Making fewer payments means you also pay less total interest, making this a very cost-effective financing option.
The major drawback, however, is that making fewer payments requires the payments to do make to be substantially larger. Though you save money over the life of your loan, it may be too difficult to find room in your budget for a 36-month auto loan.
48-Month Auto Loans
Adding a year to your loan has its own benefits, namely, reducing monthly payments. 48-month auto loans are probably the most popular as far as term length goes, and that’s because they’re long enough to keep payments reasonable while not extending out over so many years that the borrower pays more in interest than necessary.
60-Month Auto Loans
Most experts recommend that you do not agree to a loan term of more than five years. A 60-month auto loan is great for a borrower who has limited income to allocate toward loan payments and wants to reduce the monthly cost as much as possible, and is common for people with bad credit. However, in doing so, the borrower ends up paying much more in interest over time. If extending your car loan to a 5-year term doesn’t accomplish your goal of affordable monthly payments, you’re probably not in the financial position to take on a loan at all.
Determining what your priorities are–whether it’s paying less for your car over time or on a monthly basis–will help you figure out which auto loan term length works best for you. A smart plan combined with the lowest rate you can find will result in a smart financial move.