Did you know that used car interest rates change like the breeze over your head? One of the most important purchasing decisions you will make in your life will probably be the purchase of your car. And if you’re like most people, 70% of all car buyers will be financing that purchase. Furthermore, most people are perfectly willing to take the time to study which cars to buy. They like to look at all the variables like reliability, fuel economy, extra features, design qualities, and of course, price. What people don’t realize is that what generally has the biggest impact on that last variable, price, is the interest rate on the loan. Given that information, wouldn’t it make sense to spend some time researching your car loan? You must turn around. This is particularly true when looking at used car interest rates.

Before buying a car

Shopping for the loan before choosing the car can make all the difference in getting the interest rate on that used car. It sounds like something simple and you may even be confused as to why this should be. Think about the last time you went to a dealership and looked at a car. If you’re like me, you just hate seeing that salesman coming up. For a brief moment you have thoughts of being like a caged animal with little chance of escape. We don’t even dare to ask the price. Why, because we know what the answer will be. The salesman, looking victorious, always comes back with something like “it depends”. He can make the price whatever you need, all based on the financing and monthly payments you can afford.

Interest Rate Examples

Let me show you how interest rate changes can affect the overall price of your next car. I think these examples will help you begin to see why doing your homework up front on your car loan can be so important. If you buy a car for $20,000 and put down $3,000, your loan balance will be $17,000. Take a look below to see what the interest rate and length of the loan can affect your monthly payment and total price.

5-year loan @ 7%=$336 payment and $23,200 op* 5-year loan @ 11%=$369 payment and $25,200 op* 6-year loan @ 7%=$289 payment and $23,900 op* Loan at 6 years @ 11%=Payment of $323 & op* of $26,300

*Total price (op) is the price of the car plus the price of the loan.

In conclusion

The shorter duration and lower interest rate loans make the overall price much cheaper. If you do your homework in the front, it will possibly save you thousands in the back. As I mentioned earlier, the interest on used car loans changes quickly, depending on where you get the car loan, the length of the loan, and how much shopping you do before choosing the car. I recommend applying with several lenders before deciding who to go with.