Securing an auto loan is in many ways not much different than purchasing the accompanying auto insurance – the type of car, as well as other factors, can have an affect on your rate. So before you go out and buy your first vehicle, take a moment to determine just how your interest rate might be affected.
Sports Car vs. Minivan Insurance Rates
As you can imagine, if you are interested in purchasing a fast and furious vehicle then you are most definitely going to be paying more in insurance – and the same goes for your interest rate. Banks view fast cars as a higher risk, so in order to insure it for you, they charge higher interest rates. If you decide to get a minivan for the family, you’re most likely going to see a lower interest rate at the same dealership.
The Condition of the Vehicle Affects Rates
Another factor that affects the interest rate of an auto loan is the condition of the vehicle. For example, if you want to purchase a new vehicle, you can expect to pay a lower interest rate. Surprised? Believe it or not, banks view newer cars more favorably because they are more reliable. As a result, you will pay less in interest rates by buying new.
The Amount of the Auto Loan
If you’re looking to take out an auto loan for a car that is more expensive, then you can also expect to pay more in interest charges. This is especially true for a used vehicle that is more expensive than many newer ones. Car dealers are regularly assessing the risks involved in financing their cars, so the more they are willing to offer you in financing, the more you’re going to pay for their generosity.
As you can see, the car type does have an effect on the amount of the auto loan accompanying it. But since credit scores, the length of the term and other factors also affect the rate, it’s good to consider all factors, not just the style and year of the vehicle, when deciding what type of car to purchase.