Financing 101 at Mike Shaw Kia

Auto Financing 101

When you prepare to buy your next vehicle, you can look forward to an affordable and rewarding experience at our Corpus Christi dealership. While exploring the selection and taking a test drive can be exciting, the next step – auto financing – is just as important. Understanding the basics of financing can help you feel confident throughout the process, and you’ll have everything you need to secure the right auto loan when you count on the experts at Mike Shaw Kia. Let’s go into the details of the financing process to see how easy it is to get an auto loan in Corpus Christi, Texas.

What Is Auto Financing and How Does It Work?

To finance the purchase of a vehicle, you borrow money from a lender, typically a bank or credit union, and agree to repay it over a specified time period. In addition to the amount originally borrowed, you’ll also have to pay interest that the lender charges for the auto loan, making monthly payments until the loan is paid off in full. Relatively few car shoppers pay with cash up-front, so auto financing is a very common way for drivers to purchase the vehicles they want.

Next, familiarize yourself with these financing terms:

Interest Rate: This is the price the lender charges for borrowing their money. It’s determined as a percentage of the original loan amount.

Loan Term: This is the period of time you have to pay back the auto loan. These are usually 36-, 48-, or 60-month durations.

Conditions: The lender might attach certain conditions to your auto loan, like penalties for late payments or rules about early payoff.

Types of Auto Financing

Not all financing plans are the same, and there are several different types to fit specific situations:

  • Secured Auto Loans: A secured loan is backed by the vehicle being purchased. That allows the lender to repossess the vehicle if you default on loan payments, and they typically have lower interest rates than unsecured loans. They generally require a down payment as well.
  • Unsecured Auto Loans: The car you purchase is not used as collateral for this loan, so your eligibility depends on your credit score. This loan type usually involves a higher interest rate than its secured counterpart, and it can be a useful pathway to ownership if you have concerns about a down payment or your credit score.
  • Auto Refinance: Sometimes, car owners find it beneficial to take out a new loan to pay off their original auto loan. If your credit score has improved since your first loan began, or if you’re looking for a lower interest rate, refinancing might work in your favor.
  • First-Time Car Buyer Loans: Car shoppers buying their first vehicle can take advantage of this loan type, which often comes with lower interest rates than other loans. It might also feature other benefits, waived application fees or a lower down payment.
  • Leasing: Leasing differs from buying because you don’t take ownership of the vehicle. Essentially, you rent the model for a lease period (typically 24 or 36 months), and at the end of that term, you return it, sometimes with the option to lease a new model or buy the one you’ve been driving. Because monthly lease payments only have to cover value depreciation, your payments can be notably lower than auto loan payments. Just remember that you won’t own the vehicle at the end of the lease unless you end up buying it.

Factors that Affect Auto Loan Rates

The auto loan rate you qualify for depends on multiple factors:

Credit Score: The higher your credit score, the lower your interest rate could be. Potential lenders will consider more details, however, including your debt-to-income ratio.

Loan Term: If you go with a short lease term, you might have higher monthly payments with lower interest rates. That’s because you would have less time to repay the amount borrowed. Although the payments are higher than a longer term’s payments would be, the lower interest rate means that you’ll end up paying less in the long run.

Down Payment: Larger down payments often lead to lower interest rates since there would be less money to pay back. You can also trade-in your old vehicle to use its value toward the down payment, so use our Value Your Trade feature to see how your existing vehicle could help you keep rates low on the one you want to buy.

Vehicle Age: Because newer models are considered less likely to break down, they frequently come with lower interest rates than used vehicles. New vehicles might also let you take advantage of dealership and manufacturer promotional rates that you wouldn’t find with used cars.

How To Determine Your Monthly Budget

To make sure you’re buying within your means, set a budget that includes auto loan costs along with the rest of your vehicle expenses. Common knowledge holds that your transportation costs should stay within 15 percent of your monthly income, and that includes all factors from loan payments to fuel, insurance, and maintenance. To see what your insurance payments could be, request a quote from your preferred insurance company.

How to Get Pre-Approved for an Auto Loan

When you get pre-approved for an auto loan, you can shop knowing exactly how much car you can afford. To get started, you’ll need to provide some basic info about your employment, income, and credit for potential lenders to analyze. Once they determine how much money they can let you borrow, you can get a quote along with the interest rate they’d charge. With those details in mind, you can narrow down your list of options until you’ve found the vehicle that fits both your budget and your needs. We’d love to help with your financing details, so feel free to apply online via our secure financing form.

Visit Us at Mike Shaw Kia

Whenever you’re ready to purchase the car of your dreams, you can count on us for an easy and rewarding financing experience at Mike Shaw Kia. Call or come see us if you have any questions about the financing process, and feel free to take a look around our new Kia selection to see what we have waiting for you. We hope to see you soon at 6802 S. Padre Island Drive, Corpus Christi, Texas 78412.

Mike Shaw Kia 27.697490, -97.347780.