How Much Can I Finance for My Auto Loan? The Answer May Surprise You.
If you’re starting the car buying process, or considering refinancing an existing auto loan, then one of the first questions that often comes up is how much can I afford to finance for my auto loan?
Before signing on the dotted line, here’s what goes into knowing the amount you can finance for an auto loan and how to get a clear idea of your budget with a new (or not-so-new) ride.
Know What Impacts the Auto Loan Amount
There’s no one-size-fits-all answer, but lenders typically look at a few key factors when determining how much you can finance.
Income and Debt Obligations
First, lenders want to know what you can comfortably afford. They’ll look at your income along with existing expenses such as housing, credit cards, and other loans. The monthly payment has to fit comfortably into your monthly budget, or else it’s a red flag to the lender.
Credit Profile
Your credit score and history play a big role in how much you qualify for. Strong credit can open the door to better interest rates and more flexible loan options. Having a lower credit score may limit how much you can borrow or increase the interest rate, which makes the loan more expensive for you.
Loan Term
Auto loans typically range from 36 to 72 months, though we’re seeing longer terms on a more regular basis now with the increase in vehicle prices. A longer term typically lowers your monthly payment, but you’ll pay more in interest over time. A shorter term costs more each month but you pay less overall in interest.
Vehicle Price
The cost of the car is obviously a major factor, but your down payment and any trade-in value matter just as much. A larger down payment reduces how much you need to finance and can make your loan more manageable.
Use an Auto Loan Calculator
If you want a quick, realistic idea of what you can afford, an auto loan calculator is one of the easiest tools to use.
You can plug in things like:
Vehicle price
Down payment
Trade-in value
Loan term
Estimated interest rate
You can use the auto loan calculator from Space Age CU to get an estimated monthly payment based on your inputs. You’ll quickly notice how much you can impact a monthly payment by changing one of these variables.
Get a Pre-Approval
If you want a clearer picture of how much you can finance your auto loan for, then getting pre-approved is another option.
Getting pre-approval makes the dealership experience smoother. Instead of figuring out financing on the spot as the salesperson stares at you, you can focus on finding the right car within your price range.
With pre-approval you’ll know how much you’re approved to finance and your estimated interest rate. This gives you a more accurate way of calculating what price range to shop in. Space Age CU makes it easy with our online loan application, so you can start the pre-approval and loan process from anywhere.
