Inside the Interest Rate: 5 Things I Learned
If you’re in the market for a new car, but are intimidated by the financial aspect of purchasing or leasing a vehicle, let this blog supply you a little relief.
I, too, had many questions about interest rates, and wondered what I could do to obtain a lower one. So, I went straight to the source–our in-house finance director. Here are the 5 things I learned after my chat with the money guru…
1. What you put down doesn’t affect your rate. Turns out, the cash or money you put down will not affect your interest rate. However, that money will put you in a better position to get approved (and get a lower payment) if you have poor credit. In other words, your interest rate is tied to your credit score.
2. The car you choose makes a difference. Picking an older car, or one with higher mileage? You can expect a higher interest rate. Going with a newer car? You’re in luck. What you probably don’t know is that often times the manufacturer (and even the bank) will offer an incentive in order to get your business when purchasing a new car. So, go ahead and spoil yourself.
3. Conventional interest rates don’t apply to leases. When you lease a car, there isn’t the usual interest rate–instead, it’s called a “money factor”. This can be calculated to figure out what it would be if it were an interest rate, if that’s easier for you to understand. All in all, this too comes from the program(s) that the manufacturer is offering at the time of the lease, and is also based on your credit score. Which leads me to my next point…
4. Leasing is the more attractive option. There are multiple reasons why leasing provides greater benefit to the customer. First, you’re usually left with a lower monthly payment, and because of this, you can get more car for your cash. Second, you’re dealing with a shorter term of payments and less maintenance (and who doesn’t love that). Third, you’ll save money on that pesky sales tax, because you only pay on what you use, versus paying all of the sales tax when you purchase a car. Last, but certainly not lease (see what I did there?), you can purchase additional miles for cheaper. On the contrary, if you purchase a car and drive a lot of miles, the depreciation will be steeper than if you paid for miles upfront on your lease.
5. Have good credit. Simple and easy, the best way to obtain a lower interest rate is to stay on top of your bills so that you earn yourself a great credit history.
Have other questions about purchasing or leasing a car? Email firstname.lastname@example.org and I’ll answer your question in an upcoming blog!