That can help you stay focused on the goal: getting the vehicle you need at the price you want.
How to finance your car while avoiding overpaying
Pay close attention to the length of the loan—not just the monthly payment. Before agreeing to a loan that stretches more than 4 or 5 years, make sure you understand the total cost you’ll pay in interest over the life of the loan.
For instance, borrowing $25,000 to buy a new car at a 4% APR for 60 months would cost about $2,625 in interest with a monthly payment of about $460. Looking at the same loan terms for 72 months, the total interest cost would come to $3,161 with a monthly payment of about $391.1
Stay away from car loans that could put you upside-down
If you’re buying a new car, you may need a sizeable down payment or trade-in to avoid owing more than your car is worth right away. The value of a new vehicle depreciates quickly in the first couple of years of ownership. If anything happens to the car, you’ll still owe the full amount of the loan, unless you’ve bought gap insurance. Gap insurance covers the difference between the value of the car and your outstanding loan balance.