Target I can understand the basics of how

Target: I can understand the basics of how to get a car loan and explain the effects of compounding interest, down payments, and paying extra on a loan payment. How do I get a Car Loan? A basic overview

If you have cash… • Use it, buy the car!

I have cash but… • I don’t have the full asking price of the car.

I have cash but… • I don’t have the full asking price of the car. – Use what you have as the down payment on the car.

I have cash but… • I don’t have the full asking price of the car. – Use what you have as the down payment on the car. – A good goal is 20% down payment.

I have cash but… • I don’t have the full asking price of the car. – Use what you have as the down payment on the car. – The more $ you put as a down payment, the lower your monthly payment will be.

I have cash but… • I don’t have the full asking price of the car. – Use what you have as the down payment on the car. – The more $ you put as a down payment, the lower your monthly payment will be. – Also, the more $ you put down, the less interest you will pay.

Let’s Practice! • Bank Loan Calculator – You are buying a car that costs $20, 000 • What is your monthly payment? – What happens to your monthly payment when you put $4000 as a down payment? – What happens when you shorten the term of the loan? – What happens when you pay an extra $50 per month?

The Loan • Who do I borrow the money from?

The Loan • Who do I borrow the money from? – There are several possibilities: • Your bank/credit union. If you have a savings/checking account your bank may offer you a loan.

The Loan • Who do I borrow the money from? – There are several possibilities: • Your bank/credit union. If you have a savings/checking account your bank may offer you a loan. • A third party bank. This is a bank that you don’t have an account with, but they frequently do business with the car dealer and will extend you a loan. The dealer will collect info from you and submit it to the bank while you wait.

The Loan • Who do I borrow the money from? – There are several possibilities: • Your bank. If you have a savings/checking account your bank may offer you a loan. • A third party bank. This is a bank that you don’t have an account with, but they frequently do business with the car dealer and will extend you a loan. • In the case of a new car dealer, through them. GM, Ford, Chrysler have their own lending institutions.

The Loan • Who do I borrow the money from? – There are several possibilities: • A third party bank. This is a bank that you don’t have an account with, but they frequently do business with the car dealer and will extend you a loan. • In the case of a new car dealer, through them. GM, Ford, Chrysler have their own lending institutions. • Buy Here, Pay Here. Watch out! A BHPH dealer finances you themselves, but charges extremely high interest rates

What kind of interest rates are we talking • New Cars vary about? to 8%. from 0% up – Search web really quickly and find some auto rates for today!

What kind of interest rates are we talking • New Cars vary about? to 8% from 0% up • Used car loans vary from 5% up to 10%

What kind of interest rates are we talking • New Cars vary about? to 8% from 0% up • Used car loans vary from 5% up to 10% – Remember the better your credit score, the lower your APR will be!

What kind of interest rates are we talking • New Cars vary about? to 8% from 0% up • Used car loans vary from 5% up to 10% – Remember the better your credit score, the lower your APR will be! • A BHPH loan can vary from 12% up to 25%. – Back to the loan calculator

Questions to Ask? • 1. What is the APR?

Questions to Ask? • 1. What is the APR? • 2. What is the term? (length of the loan)

Questions to Ask? • 1. What is the APR? • 2. What is the term? (length of the loan) – The longer the loan, the more interest you will pay!

Questions to Ask? • 1. What is the APR? • 2. What is the term? (length of the loan) • 3. Are there any fees associated with the loan? – Is there an early payoff fee?

Questions to Ask? • 1. What is the APR? • 2. What is the term? (length of the loan) • 3. Are there any fees associated with the loan? – Is there an early payoff fee? • 4. Are there any finance charges? (other added fees for getting the loan)

Shop Around • It would be a good idea to get a quote from three different lending institutions before signing a loan.

Buy or Lease • Remember the second you drive a used or new car off of the lot, it begins to depreciate in value.

Buy or Lease • Remember the second you drive a used or new car off of the lot, it begins to depreciate in value. – Some estimates say the new car depreciates 20 -30% the minute you drive it off the lot.

Buy or Lease • Remember the second you drive a used or new car off of the lot, it begins to depreciate in value. – Some estimates say the new car depreciates 20 -30% the minute you drive it off the lot. • Despite that, and interest rates, buying is still a better option financially speaking

Buy or Lease • Despite that, and interest rates, buying is still a better option financially speaking. • With a lease, you are usually required to make a lump sum payment up front, then monthly payments for the term of your lease.

Buy or Lease • Despite that, and interest rates, buying is still a better option financially speaking. • With a lease, you are usually required to make a lump sum payment up front, then monthly payments for the term of your lease. • Those payments are less than loan payments, but at the end of the lease you have no car to show for it, just a stack of paid bills

Buy or Lease • Those payments are less than loan payments, but at the end of the lease you have no car to show for it, just a stack of paid bills. • The only scenario where it maybe financially feasible, is if you can use your lease as a business write off.

Summary • 1. Go to your bank, get some rough numbers and figure out what you can afford

Summary • 1. Go to your bank, get some rough numbers and figure out what you can afford • 2. Save as much money as you can for a down payment, it will save a lot of interest in the long run

Summary • 1. Go to your bank, get some rough numbers and figure out what you can afford • 2. Save as much money as you can for a down payment, it will save a lot of interest in the long run! • 3. Check out three different loan offers before deciding

Exit Ticket • Check out the Big. L for a quick exit ticket.