Subaru Lease & Auto Loan Options

An auto loan refers to a personal loan you take out for the purpose of purchasing a vehicle. If you're approved for auto financing, your lender will loan you the money you need to buy your desired vehicle. In return, you have to pay back the amount you borrowed plus interest until the loan is fully paid off. Payments are usually made on a monthly basis.

Many personal loans are unsecured, meaning they're given based on the creditworthiness of the borrowers. Auto finance deals are different in that they're mostly secured loans, which require some form of collateral. The vehicle you purchase will be the collateral. Therefore, your lender has the right to repossess and sell your car if you fail to make payments toward your auto loan.

An auto loan comprises four main components, which you should take into careful consideration before signing an auto finance deal. These components include:

• Loan costs: The total cost of an auto loan can be divided into three parts: the principal, interest, and fees. The principal refers to the agreed price of the vehicle, while the interest is the costs accrued over the duration of the loan based on the specified interest rate and the principal amount. Your loan may also come with fees. Fees such as title costs and taxes are non-negotiable, whereas origination fees and delivery charges are negotiable.
• Interest rate: An interest rate refers to a basic rate your lender charges for the money you borrow. Your auto loan may show two types of rates: interest rate and annual percentage rate (APR). The APR differs from the interest rate in that it includes fees related to the loan. When you're shopping for a loan, make sure you don't compare one lender's APR with another lender's interest rate.
• Down payment: Down payment is the payment you make upfront when you purchase a vehicle. In a trade-in, you can use your old car as a down payment. The minimum down payment is generally expressed as a percentage of the price of the vehicle. If you make a large down payment, you'll be borrowing less from your auto finance provider.
• Terms and conditions: Terms and conditions include many other items that make up an auto loan, such as the duration of the loan, payoff and resale terms, registration and insurance requirements, maintenance requirements, loan default, and repossession terms, and conditions regarding accidents or theft. It's essential to carefully read the terms and conditions of your auto loan before signing on the dotted line.

Securing an auto loan can be a complicated process. However, you can make the process easier and smoother by being properly prepared. Follow these tips to get an auto loan as quickly as possible.

• Determine your budget: When you're working out your car budget, you have to carefully calculate how much you can pay toward your auto loan every month. You should also take into consideration ongoing costs such as gas, maintenance, and insurance. Then, determine the amount of down payment you can make or the trade-in value of your current vehicle.
• Check your credit score: Before you start talking to auto finance providers, you should have a clear idea of your credit standing. You can either get your credit score from a credit bureau for a minimal fee or go to one of the websites that offer free credit scores. Lenders use credit scores to determine loan eligibility, loan terms, and interest rates. If you have a high credit score, you'll have a better chance of securing a loan with a lower interest rate.
• Get pre-approved: It's important to get pre-approved for your auto loan because it allows you to set your limits before you walk into a dealer's showroom. Nonetheless, bear in mind that a pre-approved loan gives you an idea of which vehicles you can afford, but it doesn't mean you've committed to buying any vehicle.
• Shop for your vehicle: Visit your local auto dealership and choose the vehicle you want to buy. Then, let your auto finance provider know the year, model, and Vehicle Identification Number of your chosen new or used Subaru vehicle. Also, you need to buy auto insurance as soon as possible because most dealers won't allow you to drive away without providing proof of auto insurance.

If you have trouble securing an auto loan because you have bad credit, check out the following tips to increase your loan approval chances.

• Get a cosigner: If you have a bad credit score, you should consider applying for an auto loan with a cosigner. A cosigner puts their credit score on the line to help you secure a loan. So, if you fail to make your monthly payments, you'll jeopardize their credit score. A cosigner is typically someone very close to you, such as a parent or sibling.
• Save up a large down payment: In general, it's recommended that you make a 20% down payment for a vehicle purchase. Nonetheless, if you're buying a car with bad credit, you'll likely need a larger down payment to get your loan approved. A large down payment will reduce the amount you owe compared to the value of the vehicle, which is also known as loan-to-value ratio. The bigger your down payment, the smaller the risk your lender has to take in giving you a loan.

If you need auto financing for a used or new Subaru, come meet the helpful and friendly staff at Hiley Subaru. We'll make sure you get the right vehicle to fit your financial situation.