Considering the purchase of a used car? Wondering what to do if you don’t have enough money to pay the entire purchase price?

You can finance the purchase of a used car through your bank, credit union or a dealer.

Here are some basic terms to know and questions to ask as you begin the process …

We know: The Basics of Financing A Used Car

Important Facts to Know Before You Finance

Financing means you pay more money.

When you finance the purchase of a used car, you are borrowing money to pay for the car. As a consequence, you will end up paying loan fees and interest on the money you borrow. That means the car will cost more than if you paid for it in cash.

Four things to think about before you finance.

  1. How much money can you afford to put down as a down payment?
  2. How much will your monthly payment be?
  3. What is the term of the loan—how many months or years will you be paying?
  4. What is the annual percentage rate (APR) of the loan. Keep in mind that the APRs for used cars are higher and the loan periods are usually shorter for used cars than for new cars.

Shop around, compare and negotiate.

Loans are like any other product. You can get a better deal if you shop around. And don’t be afraid to ask for discounts or reductions.

Here are some of the issues you should understand before you sign a loan agreement:

  • the exact price you’re paying for the vehicle
  • the amount you’re financing
  • the finance charge (the dollar amount the credit will cost you)
  • the APR (the cost of the credit, expressed as a yearly rate)
  • the amount of your payments and the number of payments you’re making
  • the total sales price, which is the sum of the monthly payments, plus your down payment

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