Auto Financing 101 in Butler, PA

Auto Financing 101

Whenever you prepare to purchase a vehicle, you’ll find a variety of high-quality options here at Honda North. You’ll also get the financing help you need when you turn to our auto finance experts, and we can walk with you through every step of the process. Let’s take a look at all the details to see how getting an auto loan works.

How Does Auto Financing Work?

When you take out an auto loan, you borrow money from a lender to complete your car purchase. After that, you have a set time period to repay the auto loan plus any interest that the lender charges you. Often, the lender is either a bank or credit union, and they’ll weigh factors like your credit score to determine the amount they let you borrow and what interest they will charge.

Interest Rate: This is the price charged for borrowing the lender’s money. It’s figured as a percentage of the loan amount.

Loan Term: This is the time period you have to pay off your auto loan. It’s usually either 36, 48, or 60 months.

Conditions: Your lender might add conditions to your loan. These might be penalties for late payments or rules about paying off the loan early.

Types of Auto Financing

Car shoppers have access to various types of auto loans that can be useful in different situations:

• Secured auto loans: This auto loan is backed by collateral, which in this case would be the car you buy. That means that the lender can repossess the vehicle if you default on the loan. It can also entail lower interest rates and will likely require a down payment.
• Unsecured auto loans: Unsecured loans aren’t backed by collateral. They might have a higher interest rate as a result and will be dependent on your credit.
• First-time car buyer loans: If this is your first car purchase, you might be able to take advantage of this loan type, which offers benefits like a lower down payment, lower interest rate, and waived application fees.
• Auto refinance: In some situations, drivers can take out a new loan to make it easier to pay off the original auto loan. If you have improved your credit score since taking out the first loan, or if you’re looking for a lower interest rate, this option might work well for you.

Factors that Affect Auto Loan Rates

Your auto loan interest rate can be determined by a variety of factors:

Credit Score: A higher credit score can help you access a lower interest rate. The lender will likely consider more than the credit score on its own, looking into details like your debt-to-income ratio.

Loan Term: If you go with a shorter loan term, your loan might involve higher monthly payments and lower interest rates since there’s less time to repay the amount borrowed. Since the interest payments are lower, you’ll actually pay a lower total amount than if you went with a longer loan and higher interest added to the debt.

Down Payment: If you pay a larger down payment, you could set yourself up for a lower interest rate since there would be less money to pay back. To help with that down payment, consider trading in your old vehicle, and take advantage of our Value Your Trade tool to see what your existing vehicle can do for you.

Age of Vehicle: Because newer cars are not expected to break down as easily, they generally garner lower interest rates than used vehicles. New vehicles may also be eligible for manufacturer or dealer promotional rates.

How To Determine Your Monthly Budget

If you establish a budget before coming to the lot, it will be easier to shop within your means. To keep new car costs from encroaching on your funds, it's helpful to keep all transportation expenses within 15 percent of your monthly income. That includes your loan payments, fuel costs, insurance rates, and auto service. If you’d like to see what your insurance costs could be, just request a quote from your preferred insurance provider.

How to Get Pre-Approved for an Auto Loan

To take the first step toward owning the car you want, you can apply for financing online with our secure form. With just a few quick questions, you can get pre-approved for financing, and then you can shop our selection with confidence. When you apply for financing in Butler with Honda North, you won’t have to worry about mountains of paperwork or complicated terms. Our finance experts will work with you to connect you with the right auto loan for your situation.

Count on Us at Honda North

When you’re ready to secure your auto loan, we’ll be here to help at Honda North. Call or come see us at 665 Evans City Road, Butler, Pennsylvania 16001.