When first-time car buyers pick out their ride and are ready to take it home, many are blindsided by the need to take out a loan, including how much to borrow, what it entails, where to get a loan, and ultimately, going online and searching for “What is car financing?”

Capitol Ford clarifies the confusion for first-time car buyers and those still browsing for the perfect model and explains the benefits of financing your vehicle.

What Goes into an Auto Loan?

What is financing a car? Simply put, an auto loan is when you borrow money from a credit union, bank, or other lender to purchase a vehicle, and you repay that money through monthly payments. But what goes into an auto loan?

Several components play into your auto loan, determining how much you need to borrow and your down payment.

1. Interest Rate: This is the percentage you pay in addition to the cost of the vehicle, and it’s based on your credit score, the loan term, and the lender.

2. Loan Term: This refers to the duration required to repay the loan in full. Terms can span 36 to 72 months, but depending on the loan's length, you may experience a decrease or increase in monthly payments.

3. Monthly Payment: At the beginning, middle, or end of each month, you pay a fixed amount toward your loan, which includes both principal and interest, until the loan is paid off.

4. Down Payment: This is money put down to reduce the amount you have to borrow and lower your interest rate. Drivers typically put down between 10% and 20% of the car’s price, but many place a larger down payment, as this can reduce their monthly payments.

Where Should You Look for a Loan?

When drivers search for “What is auto financing?” they wonder where to get a loan. At Capitol Ford, our financial team goes the extra mile as our dealership works to streamline car financing. We collaborate with local banks in the area and the manufacturer to help you secure the perfect loan, guiding you through the process.

Are there other places? Yes, here are a few places:

1. Online Lenders: You’ve probably seen commercials from online lenders offering deals and specials when you finance through an app or on your computer. It's a way to get fantastic rates from the comfort of your own home.

2. Manufacturer Financing: Ford and other companies offer various financing options, promotions to qualified buyers, and exclusive offers available only to customers.

3. Dealership Financing: Believe it or not, some dealerships offer in-house financing options that can give you unique and customizable incentives for your loan.

4. Banks and Credit Unions: A traditional way to obtain an auto loan is to visit a bank or credit union, as they can offer competitive rates, even if you haven’t banked with them.

The Pros of Buying a Car Through Financing

When you finance a vehicle you want to purchase, many people focus on monthly payments, crafting a budget, and wondering how much down payment to make. They often overlook the benefits of financing.

1. Full Ownership: Once you get a loan and pay it off, the car is yours to keep or modify, unlike leasing, where you only rent the vehicle.

2. No Mileage Limits: What’s the Difference Between Leasing and Financing a Car? When you purchase a vehicle, you can drive it coast to coast without anyone telling you no, unlike leasing.

3. Sell or Trade as You Like: After you pay off your loan, you can sell to whomever you like and trade as you see fit, allowing you to upgrade to a new model or another car you love.

Auto Financing Made Simple

When you’re looking to finance your car, understanding what an auto loan is, what it entails, where you can secure one, and more will help you take the necessary steps to get a loan you love and drive off in a model you adore.

Are you ready for financing, or need a fantastic team to help guide you through the process? Visit Capitol Ford in Santa Fe, NM, today!