How Long Should My Auto Loan Term Be?

You are getting all set to try to find financing for your dream car and you’re trying to decide how long your auto loan should be. The answer is that it depends on your situation.

A typical loan term used to be about five years, now it’s common for it to be six to eight years. The fact is, the longer your loan term the more you pay in interest on your vehicle. However, you don’t want to have a really short term and not be able to make your payments. You really have to find the situation that is best for you.

There are two major things to consider when working out an auto loan. Those are your monthly payment and the interest rate.

Monthly Payment

This factor is something most people think about. Dealerships will tell you how low your monthly payment can be because they want to help you find a payment that fits into your budget. When looking at monthly payments, it is important to find a monthly payment that is small enough that you will be able to handle it every month, but you don’t want it to be too small because then you will probably have a longer loan term that forces you to pay more in total interest.

Interest Rate

Your interest rate is often quite dependent on your credit score. Those with a lower credit score can expect to have higher interest rates on their auto loans. If you do have a higher interest rate, you may want to try to shorten your loan term to lessen the amount of interest you have to pay.

If you are curious about the ways in which your payments could work out, check out our payment calculator here to give you a better idea of the types of payments you could be making. Also, if you have any specific questions about financing, let us know.

What Factors Affect Your Credit Score?

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Worried about your credit? Not sure where your score comes from? We can help. Let’s take a closer look at the factors that make up your FICO score, so you can know how to improve your score for the future. Many banks use the FICO Credit Score to determine whether they will give you a loan, so let’s check out what makes up a FICO Credit Score.

Payment History – 35%

The first, and biggest, section of your credit score is made up of payment history. This is because banks and other lenders want to be able to tell if you are going to pay your loan back. They feel, a good way to determine that is by how you have paid back other loans or credit in the past. This is why it is very important to make all your payments on time.

Amounts Owed – 30%

This section Amounts Owed or Credit Utilization is how you use your credit. If you are frequently maxing out credit cards that is not good. It is okay to owe money, as long as you are making timely payments back to your lender.

Length of Credit History – 15%

The length of time you have had credit accounts open accounts for 15% of your FICO score. This determines that you can pay back money owed over a period of time. If you are a new credit user, this may account for your score being a little bit lower because you simply haven’t built up the length to have this section boost your score.

New Credit – 10%

This section New Credit accounts for 10% of your score. This section  monitors how often people are taking on new lines of credit. For instance, if you open several new lines of credit at once, it can suggest that you are in financial distress. This makes lenders less likely to loan you money.

Credit Mix – 10%

This category is comprised of looking at the different types of credit that you have. It is good to have more than one type of credit or more than one account because that gives a lender the option to look at how you’ve made payments on a few different accounts.

To improve your credit score, you first have to know what your credit score is made of. We hope that this article helped you on your way to better credit!

How to Buy a Car with Bad Credit

car-loan-applicationYou may be wondering how you could possibly buy a car with bad credit, the good news is it is possible and you can improve your credit along the way.

Bad Credit is not a permanent situation. If you have had financial difficulties in the past, your current credit score may not be great, but the good news about a bad credit score is it can change. Check out the steps below to get an auto loan with bad credit.

Know Your Credit Score

The first step to getting a loan is knowing your credit score. When you go in to talk about financing options, you don’t want to be surprised by your credit. Know what you have going for you and know where you need to improve.

Improve Your Credit Score

If you want, you can try to wait several months to get a car so you can improve your credit score. Making timely payments over the course of several months will improve your credit, which can lead to better financing options.

Be Ready to Make a Large Down Payment

If you have a little bit more money saved up and you can make a larger down payment, lenders may be more willing to work with you even if you don’t have the best credit score. Showing that you have saved and you have the money to make a decent down payment will give them more confidence in your abilty

Shop Around for Good Offers

Take some time to look around for good offers. This includes offers on vehicles as well as offers on financing. Find something that will truly fit within your budget and will allow you to make timely payments. If you have a bad credit score, you are likely to have a higher interest rate on any auto loan you take out. This is because your credit score indicates you may be more of a risk to lenders. However, you can still shop around for different offers, and after you have made timely payments for several months, you may be able to lower your interest rate.

Financing your car can be a stressful situation, but it doesn’t have to be. If you prepare in advance and go into the situation with confidence, you will probably be able to find the financing you need. If you have questions or are simply interested in learning more, you can contact us.

Should I Buy or Lease a Car?

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When you are looking to upgrade your vehicle, you may run across lease offers as well as offers to buy a new vehicle. Which is better? Whether or not leasing or buying a vehicle is better is really up to you and your situation. However, there are some things to take into consideration when making this decision, so check out the information below to help you with your decision.

Leasing

Advantages

There are many good things about deciding to lease a car. One big one of these is low monthly payments. If you are not willing to commit to a large monthly payment, leasing may be a good option. Leasing also offers you the advantage of little or no money necessary for a down payment. Other advantages include low repair costs because you are usually under warranty and the lack of hassle in transitioning to a new car.

Disadvantages

The disadvantages include a limited amount of miles you can travel, you don’t own the car at the end of the lease and it can be more expensive to lease long term. Something else to keep in mind is that it can cost you money to terminate a car lease early.

Buying

Advantages

The major advantage of buying a car is flexibility. It is your car to do with what you choose and you can drive as many miles as you want. It is also more economical to buy a car in the long term. If you are looking to finance a car, you can do so here.

Disadvantages

The major disadvantage of buying a car is that it can be more expensive initially. Buying a car requires a sizable down payment and higher monthly payments than leasing.

Take these factors into consideration as you determine what you will do on your next upgrade, but be sure to stay true to yourself and your lifestyle!

What Do I Need to Bring to Buy a Car?

car-keys-new-carBeing at the point where you are ready to go to the dealership and officially buy that car you’ve been looking for is an exciting step! Getting a new set of wheel is exciting, but it can also be stressful. We want to help take away some of that stress for you. If you are ready to get that new car check out the items you will need to bring with you below.

License

This is something you will definitely need if you want to test drive a car and get a quote for that car. Don’t forget your license!

Current Pay Stub

A pay stub will be important if you want to get approved for an auto loan. Your credit score will be something that goes into the process of loan approval, but you will also want to show how much money you’re making in order to know how much your monthly payments can be.

Proof of Residence

This will also be a part of getting approved for a loan. A utility or cell phone bill will work great as a proof of residence document.

Insurance Card

Your car insurance information is something important to bring to the dealership so you can make sure you transfer your insurance and you are covered when you are driving your car home.

Any Trade Documents

If you currently have a car that you would like to trade-in, you can also bring any documents you have related to that. This could include a title or registration of the car as well as any documentation about your auto loan if it is not paid off.

If you remember to bring these documents to the dealership with you, it will help you speed up the process of buying your new car!

The Basics of an Auto Loan

car-loan-applicationEveryone needs transportation to get around, but cars and trucks can be expensive. Realistically speaking, you may need to take out an auto loan to cover the cost of your car up front. If you don’t know what to expect when getting an auto loan, it can be a stressful experience. Learn what you can before you need to get a loan and you will be prepared walking into that bank or dealership. Check out the anatomy of a car loan below and get the information you need to get your new set of wheels!

Down Payment

It is often necessary to put a certain amount of money down on a car in order to be approved for an auto loan. An average down payment is about 20% of the vehicle’s worth, but 10% down payments are also common. Down payments are important because the more money you put down now, the less you have to pay off later.

Interest Rate

The interest rate is the money that the lender makes off the loan. They give you the money to buy the car, but you have to pay them back a little bit extra. Your specific interest rate will be determined by your credit score. People with a higher credit score can get a lower interest rate, and the sooner you pay off the loan, the less interest you will have to pay.

Term of Loan

This is a very important factor to consider when taking out a loan. You want to make sure you have a good loan term because you will need to have an affordable payment every month. The longer your loan term, the less your loan payments will be a month, but the longer your loan term the more interest you will have to pay. A typical loan term is anywhere from 4-7 years, but you will want to pick a term that fits with your financial situation.

Vehicle Trade-in

This isn’t a necessary part of an auto loan, but if you do have a vehicle to trade-in, it could help you save some money on that new vehicle. The dealership can deduct the value of your trade-in from the price of your new vehicle, so you can get rid of your old car and get some money for it.

Why Buy From Us?

car-dealershipAt Toyota of Southern Maryland, we know that it is the people that make the difference. Our dealership doesn’t focus just on the cars, our real focus is helping people. We not only want to help you find the car of your dreams, but we want to make sure you’re satisfied.

Here at our dealership, our focus is you. We are a unique car dealership because we really try to think about what will be beneficial to our customers and then we make it happen for you. We offer plenty of unique services with you specifically in mind.

Some of these services include things like our 72 Hour Exchange Policy. This means if you buy any vehicle from us that you for any reason decide you don’t like, if it is within 72 hours you can come back and exchange that vehicle for another. We also have extended hours on Saturday because we know you work long and hard all week, and you might need those extra hours to really get the vehicle you want and need. We are also the home of the 6 month warranty, so we assure you that you get a good working vehicle.

As far as car dealerships go, we have the largest selection of New and Used vehicles in the area, as well as the largest selection of cars under 10,000. We feature aggressive prices because we check out our competitors’ prices so we can offer you the best one possible. We are also the only dealership to win the President’s Award. We are also a dealership that is involved in the local community.

You can buy a car from anywhere, but when you buy with us, we take care of you. There are a lot of reasons for you to shop at Toyota of Southern Maryland, so stop by today, introduce yourself and let us know how we can help you get into your dream car!