• Traditional auto loans. Borrow money from a lender, such as a bank or credit union, to purchase a vehicle. Auto loans come with fixed or variable interest rates, with terms ranging from 24 to 84 months. Interest and terms vary based on an applicant’s credit score, income, and other factors. In most cases, applicants must have a credit score of at least 650.
• Leasing. Pay a small down payment and make monthly payments that essentially cover the depreciation of the car for a predetermined lease term. Monthly lease payments are often cheaper than purchasing, but ownership of the vehicle remains with the dealership. There are also limits on how many miles you can drive the vehicle and rules about the physical condition of the vehicle during your lease. Failure to follow these rules can result in a bill at the end of your term.
• Bad credit car financing. Dealerships that provide used car financing, like Auto Bank, offer in-house financing that caters to individuals with poor credit or no credit history. Dealerships like ours provide an opportunity for those facing financial challenges to purchase a vehicle without relying on traditional lenders that might reject them from financing.

Assess Your Financial Situation Before You Consider Car Financing

Before you begin car shopping, you have to truly understand your financial situation. While you might feel you have the funds available to purchase a vehicle, there are other factors that have to be considered first. Follow these steps:

1. Calculate your monthly income after taxes. Add income from all your jobs together to make one number.
2. List out your monthly expenses, including rent, utilities, groceries, insurance, other debt payments, streaming subscriptions, phone, and internet. Don’t forget to include entertainment, clothing, and other discretionary spending.
3. Subtract the total amount of your monthly expenses from your total monthly income. For example, if your monthly income is $2,500, and your expenses are $2,000, your remaining available money after expenses is $500.

Set a Realistic Car Financing Budget

Now that you have a clear understanding of your financial situation, it's time to establish a realistic car-buying budget for yourself. As you organize your finances, there are several things you should consider before you start your car purchase.

• Determine how much you can afford. Financial experts recommend saving no more than 15 to 20% of your monthly income toward car expenses, including loan payments, insurance, fuel, and maintenance.
• Consider a down payment. A larger down payment reduces the principal, or loan amount, so you’ll have lower monthly payments. For traditional auto loans, experts recommend a down payment of at least 10 to 20% of the vehicle's purchase price. When you use Auto Bank for your used car financing, we have more flexible down payment options, because we provide our own in-house financing.
• Factor in interest rates. The interest rate on your auto loan significantly impacts your monthly payments and the total cost of the vehicle over time. If you have bad credit, it’s best to explore bad credit car financing options, which offer competitive rates and a higher chance of approval.
• Account for extra costs. Don't forget to budget for additional expenses like taxes, registration fees, and insurance premiums. Ensure you have enough funds for consistent on-time payments to avoid repossession and to help heal your credit score.

A Visit to Auto Bank Puts Your Car-Buying Budget Into Perspective

At Auto Bank, we don’t judge you for your credit rating the way a traditional bank does. We only care about whether you will be able to make your car payments on time. If you can show us that you are earning a wage that will comfortably cover the monthly repayments on a vehicle, you will almost certainly be approved for our car finance options. Creating a car-buying budget is the first step toward purchasing a vehicle you can trust. If you’re ready to take the next step in your car financing journey, contact our East Front Street car lot at (816) 207-4721 or our Truman Road location at (816) 281-3975 for more information.