Three numbers decide what a car loan costs you: the rate, the term and what you put down. Change one and the other two move with it. Here is how to read an offer in a couple of minutes.
The rate (APR)
The annual percentage rate includes the interest and the lender's fees, so it is the fairest way to compare two offers. A point of APR on a five-year loan is worth far more than any free floor mats.
The term
A longer term lowers the monthly payment and raises the total you pay. Past five years you also risk owing more than the car is worth for a long time.
The down payment
Every dollar you put down is a dollar you do not pay interest on. Twenty per cent is a good target: it usually unlocks better rates and keeps you ahead of depreciation.
The one number to compare
Ask every lender for the total cost of the loan — everything you will pay, start to finish. The lowest total wins, whatever the monthly looks like.
On “APR, terms and down payments — explained simply”.
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