Frequently Asked Questions

Doesn't applying for multiple loans affect my credit?

Not at all. The three major credit reporting agencies have decided in recent years to begin treating all inquiries for credit of a similar type (such as for a car loan or credit card), as a single inquiry as long as they happen within a 14 day period. This leniency allows consumers to use sites such as this one and shop around for the best loan.

What if I have bad credit, can I get a loan?

Yes. Though you would be well advised to take steps to improve your credit in order to avoid needing to use the subprime lending market. There are options available for people with poor credit to get loans, however, and lenders exist who will finance just about any credit situation for an auto loan. The downside, of course, is that you will pay a much higher interest rate for your loan.

How much of a down payment should I have?

Like buying a house, you should try to come up with at least a 20% down payment on your auto if you can possibly afford it. This will help to keep your vehicle more valuable than the amount you owe on it and make it easier to sell in the future and cut down on the interest payments for your loan.

What is APR and what does it mean to me?

APR stands for annual percentage rate, and it is the money that is charged to you by a lender in order to finance a loan. APRs are calculated monthly, based on a yearly schedule and the amount owed changes based on the payment you make each month, therefore your loan is amortized.

How long is the average car loan?

U.S. car loans have averaged five years for the last few decades, but a new option, the 72 month, or six year loan, is quickly gaining ground and popularity.

How long should my car loan be for?

As short a period as possible that will allow you to comfortably make the car loans. The advantage to having a short term (around 36 months), car loan is that you will save plenty in interest payments over the life of the loan, and will likely have the car paid off before the depreciation of the vehicle's value leaves you upside down in value.

What is gap insurance and do I need it?

If you buy a car without a large down payment as most Americans do, in a short period of time after driving off the lot, your vehicle will be worth less than what you owe on it. Many people falsely believe that if they got into a car accident that totaled their vehicle, their insurance would cover it and pay off the car loan. This is not true of the vast majority of insurance plans.

If you get into a car accident and total your vehicle, your insurance company will pay you what the vehicle is currently worth, not what you owe on it. This often leaves many owners in the lurch and having to pay the lender the difference. Gap insurance exists to make up the difference between a car's value and what is owed on any financing for it. If you have it and get into an accident, you can rest assured that you will be able to walk away from the loan without owing anything on it.