Auto loans make the world go ’round. It’s how you’re able to afford that new — or even used — car. Even auto leases are typically achievable because they’re a type of modified auto loan with specific stipulations pertaining to the ins and outs of driving your car. Auto loans are also key when it comes to repairing your car after an accident or shelling out for expensive car maintenance when you need a new engine.
Auto loans are truly one of the most essential forms of loan available on the market today. While you can always rely on an auto insurer or an attorney to help you understand the ins and outs of auto loans, there are plenty of guides, like this one, that can help you get better acquainted with the process.
Whether you’re new to cars or are just trying to refresh yourself on the ins and outs of auto loans, here’s what you should know about auto loans.
New and used cars
Even if you have a significant savings account, few people want to shell out tens of thousands of dollars on a new car. That’s where an auto loan comes into play.
You’ve put in the work about investigating the perfect car for you, but it’s typically safer to go through vehicle financing to achieve manageable monthly payments. This is especially vital for new cars that can otherwise send your bank account running for cover. Auto loans work by financing the car for you in a lump sum amount. Then, your financing organization — sometimes the auto dealership and sometimes it’s a bank — will require that you pay this money back in monthly installments with interest.
This interest that you pay back on the loan amount is known as the APR, or annual percentage rate. You’ll also get a loan term. This refers to the amount of time that you’ll have to pay back the loan. Since car loans are pretty significant, they’re usually scheduled out over 36-72 months. Of course, this is much shorter than a mortgage, but it’s a little longer than a personal loan that might have to be paid back in only a couple of years or so.
Keep in mind that a lower monthly payment won’t necessarily cost you less in the long-run. Depending on the loan term and interest rate, you might actually pay a little more in the long run. If you can afford a higher monthly payment or if you’re willing to put more money down initially, this can go a long way when it comes to paying off your loan sooner.
Regardless, a longer loan term with lower monthly payments might work better for someone struggling financially. It’s important to weigh the pros and the cons before deciding to buy that new vehicle. In some cases, a used motorcycle for sale will cost less just because it was made the year before. It’s virtually new: don’t let a fancy newer model blind you from other possibilities, either. In some cases, new cars can even up your insurance rates.
Before you agree to take on a new car, be sure to talk out the ins and outs of auto loans with a banker and your insurance agency. They might even be able to direct you to a financial institution that has lower rates for people with a good track record. You never know when you might be able to find a good deal on auto loans if you reach out.
Auto loans for repairs
Auto loans are most well-known when it comes to buying a new or used car. But you might also have to invest in an auto loan in you get into a car accident, especially if you’re the one who caused the accident in the first place.
This is because your insurance is the first line of defense: they will have to pay for the other guys’ repairs. Your car accident lawyer can help to explain this information in more detail. In some cases, your insurance will cover the damage to your vehicle, too, but this isn’t always the case.
But those who were the victim of an accident might also try investing in a car loan. Investing in an auto loan is a great way to get back on your feet — and to get your car back on its wheels — until your case finalizes and your insurance gives you the money that you deserve. It can also help you pay for the cost of hiring a lawyer should your car accident case go to court. It’s no secret that auto collision repair can cost a pretty penny, but it might drain your bank account if you have to pay for medical bills, insurance costs, and attorney fees on top of it.
However, investing in auto loans isn’t always just the result of an accident. Insurance might also not cover the cost of repairs on routine maintenance, like getting a new engine or replacing the crack in your windshield. You can rely on your auto accident injury attorney to go over the ins and outs of this facet of auto loans, but more often than not, you’ll be paying for those necessary repairs right out of your own pocket. If you need your car for work, getting an auto loan could mean the difference between going to work or being forced to take paid time off while your car gets fixed. In the event that you still need to take PTO because of an injury, an auto accident loan can also help pad your bank account during your recovery. In fact, an estimated 62% of all the people who receive auto accident loans actually use the funds to avoid foreclosure on their home or to pay back owed rent. This isn’t all that surprising given that most Americans are living paycheck to paycheck.
Sometimes, taking out a loan is a necessity. When your car warranty or insurance isn’t able to get the job done, sometimes, auto loans are the best we can do to keep on our feet. Following an accident, it’s recommended that you look into collision coverage to avoid a situation like this from damaging your bank account in the future. Keep in mind that a car accident repair loan can cover the cost of your damaged vehicle, but it might be worth it to get a new one if your insurance claims that the vehicle has been a total loss as a result of the accident. In this case, you might want to refer to the first section again to go over what you should expect from a new or used car loan.
The DIY car repairman
Are you working on a car project? You’re not alone. There are countless DIY vehicle repair people throughout the United States that love restoring old cars to their former glory. Unfortunately, you might need capital to start learning how to restore a car, including hobby welding classes, painting classes, and, of course, auto repair classes.
Even if you already have the know-how to fix a car from the ground up, you might still need the funds to invest in new supplies, parts, and materials. After all, DIY vehicle repair demands that fixing a car is an expensive endeavor — even for those who visit junkyards for spare parts.
This is because the cost of repairing an older car can vary wildly from vehicle to vehicle, even between model to model made by the same manufacturer. For example, performing a DIY vehicle repair a Cadillac will almost always cost more than repairing an old Ford. You might also need to invest in parts that are shipped from overseas locations if you’re working on a foreign car. While restoring something so unique is definitely a worthwhile endeavor, it’s also going to cost you a little more time and money in the long run.
Additionally, every DIY vehicle repair person knows that the condition of the old car will play a huge factor in its restoration. After all, a nicely preserved Corvette will cost a little less in the long run than restoring an old Toyota that’s been deteriorating in a junkyard for a couple of years. That’s why it’s recommended that you store your current car in an enclosed space, like in a garage or under a car port. Look for a quality garage door installation company to ensure your current — and future — projects get the protection that they deserve. There’s no sense in restoring a car that’s on its last legs unless you want a serious challenge or have the necessary capital already.
A DIY vehicle repair endeavor must also have the end-result in mind: do you want to be able to drive the car around the country or around the block? Sometimes, all you need to do is refurbish a car for shows and conversation. Not every car you work on needs to be able to make it around the world in 80 days. This final idea in mind might help you choose a cheaper car loan to save money in the long run. Save the larger car loans for DIY vehicle repair projects on cars with good bones — and even better gas mileage.
It’s important to remember the extraneous costs too: you’ll also need to register the vehicle, buy plates, and invest in an inspection after the car is finally restored. This rarely costs more than a couple of hundred dollars but it’s still important to remember when you’re strategizing your cost plans.
Keep in mind that you’ll also need a car loan to buy that restoration project in the first place. Everything revolves around capital for these projects: make sure you don’t cut corners in the DIY vehicle repair process by getting a loan when you need it.
Whether you’re buying a car or performing a DIY vehicle repair project: Car loans can help
It’s almost impossible to exist in the United States today without a reliable vehicle. When more than six million car accidents occur each year, it’s only natural to wonder what your vehicle loans can do for you. Even if you’re investing in DIY vehicle repair in your home garage, you will still need ample capital to make the necessary auto repairs. Whether you’re trying to buy a new car, invest in a used car, or simply get back on your feet after an accident, rely on these tips to make savvy financial decisions when the time comes. And be sure to rely on an attorney or insurance professional when you need more help understanding the process. There’s no shame in asking for help when you need it!