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Car Financing Tips

Your budget – what you can afford

Make sure you anticipate all your costs, including fuel, registration fees, maintenance, insurance, and repairs. Depending on your state, you may also be paying sales tax.

Calculating these costs will help you determine what you can afford, and how much to borrow.

Factors that determine your interest rate and monthly payments

Your credit - we consider your credit rating, your payment history, and the amount of debt you already have.
Your income - a stable income that's high enough to pay your debts and other monthly expenses helps you qualify for a better interest rate.
Type of vehicle - interest rates on new cars are usually less than for used cars. RVs and motorcycles may also have different rates. Also remember that used cars over 7 years old may not qualify for financing.
Term of your loan - financing for a longer term lowers your payment, which can add to your monthly cash flow, but will cost you more over the life of the loan.

Deciding on the Term of Your Loan - an example comparing a 60 month loan to a 36 month loan
Amount Financed $22,000$22,000
Interest Rate (APR) 6.00%6.00%
Term of Loan 36 months60 months
Monthly Payment $669$425
Total Paid Over Life of Loan $24,084$25,500
In this example, you would pay $244 more per month with the shorter term, but you would pay $1,416 more over the life of the loan.

Your options if you have less than perfect credit

1) Apply at Wells Fargo knowing they provide less than perfect credit solutions
2) Consider getting a qualified co-signer to improve your terms
What you should confirm before you sign

Interest rate – confirm the APR, or annual percentage rate, for your loan and whether it's fixed or adjustable rate
Total amount financed – be sure the amount on your loan documents is the same as what you asked for
Monthly payments – confirm you can afford to make the payments
Potential penalties – can you pay your loan off early without paying a penalty? If not, find out how much you would pay. At Wells Fargo, there are no pre-payment penalties.
Possible hidden charges – credit insurance or other fees may be included in your loan. Don't pay for these services unless you need them.

Comparing a low interest rate and a dealer rebate

What's best for you depends on the specific terms. Here's an example of when a rebate saves you more money than a low interest rate.

36 month loan 1.9% APR (No Rebate) 6.39% APR (With Rebate)
Cost of car $23,000$23,000
Dealer Rebate -$3,000
Amount Financed $23,000$20,000
Monthly Payment $658$612
Reduced interest cost over life of loan $1,656
Do the math to determine what works best for you. Make sure you consider the monthly payment, potential penalties, and possible hidden charges.

More Auto Tips from Wells Fargo
Car-Buying Tips
Tips on Buying Versus Leasing
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