Long term auto loans, what are the options

Long term auto loans, what are the options?

The world of finance has all kinds of options for nearly every eventuality. Whether you need an insurance to finance the expense of having your body returned home or you want to buy your fiance a dream rock, there is a specially designed finance package. The car industry is no difference. Whether you are GM, the largest manufacturer of vehicles in the world and you need a loan to avoid Chapter 11, or you are a 9 to 5 office worker that needs a set of wheels, they are options.

The question is of course what type of options do you have?

Let’s start with the basics:

1) What is an auto loan?

Auto loans or car loans are a finance product that can be used to purchase a car. The bank or finance company agree to buy the car for the client and allow him the use of the vehicle for as long as he pays the loans installments. Once all the payments and fees have been paid, the borrower owns the car outright.

2) What car loan options do I have?

Many. The details do depend on your personal circumstances, your credit score and the car you are buying. We will have a look at some of the basic options.

Long term auto loans. These are the main option we will be discussing as the title of our article reflects. We will then compare the other options with long term auto loans. Long term auto loans are generally a finance product designed for new, and therefore expensive cars. The length of tenure (or amount of time the loan takes to be paid) you can choose from varies from one finance company to another and on the price of the car, but range from 36 to 60 months. This finance product allows the client to buy expensive cars with relatively low monthly payments. The only issue is that the interest paid is one of the highest in the industry. Tenure in finance products is very important as it is in most cases the most important variable when calculating interest paid.

Short term car loans. As our previous option short term car loans do what the label says, they provide car loans with a short tenure making the monthly payments rather higher. However this option is cheaper as the interest paid is much lower. If you can afford the higher monthly payments this is possibly the best car finance option.

Car dealer auto loans. These loans are provided by the car dealer where you buy the vehicle. They are not an option in themselves because auto dealers can offer a variety of finance options. However because of similar characteristics and the popularity of them we will analyse them as a group. Car dealer loans are popular because they are generally easier to get approved. The negative side is that the interest rates are often the highest. Car dealers are rarely the best option for loans.

Be smart and pre-arrange your finance before you start shopping for a car.