My Garage

Factors that could affect your Auto loan interest Rates

Lincoln Township Motors

Getting a new car or truck is an exciting prospect, but there are some details to deal with first. Applying for an auto loan from Lincoln Township Motors is straightforward. What makes it even easier is when you understand not just how much you’re getting but also the interest rate. It determines how much you pay back, but the deal you get depends on your circumstances.

Let’s explore which factors affect the interest rate so you can strike the right balance and get an excellent deal.

Length of the Term

Auto loans have different lengths, which could be 24, 36 or 72 months. The longer the loan, the more interest payments you’ll make. Since you’re borrowing for less time, you can often find shorter-term loans with lower interest rates. However, it’s crucial to do a few quick sums when comparing rates for loans of different lengths to see which costs more in the long run.

Credit Score

When applying for an auto loan, the bank, dealership or credit union will check your credit score. It reflects your repayment and borrowing history, which affects the offer and interest rate the lender will give you. An excellent credit score of 720 or more will get the lowest rates. On the other hand, those with poor credit scores of 300 to 629 will get the highest interest rates if the loan is approved.

Type of Vehicle

When someone defaults on an auto loan, the vehicle is repossessed, which is why the age and type matter. They dictate its value, which affects your interest rate. Since some types of cars and newer cars depreciate more slowly, it’s likely that they’ll have the lowest interest rates. It’s worth asking your lender if they have different rates for SUVs versus sedans or for different makes.

Debt-To-Income Ratio

Another factor that a lender will look at when setting interest rates for your auto loan is your debt-to-income ratio. It involves your recurring monthly debt payments, such as your mortgage, and your monthly income, such as your salary. It provides the ideal indication of how likely you are to pay off your auto loan. Having a track record for borrowing and successfully paying off a loan can mean lower interest rates.

Economic Factors

While most factors are in your control, this one isn’t. The economy affects auto loans and the interest rates that lenders set. When people are earning more, and the economy is stable, interest rates tend to be higher. On the other hand, a struggling economy or a recovering one will mean that the Bank of Canada will set lower rates, and lenders will follow their lead.

Visit Us Today

Finding the best rates starts with you understanding why you’re getting a particular deal. Lincoln Township Motors offers auto financing that takes into account many factors to provide deals that work for your particular circumstances. Get in touch to find out more about competitive rates and flexible payments.

Contact Us

Contact us today and learn more about our used inventory. We stock a variety of used vehicles that are tailored to your needs.

Make an Inquiry

    Contact Us