How a loan works Farmington MI

When you purchase a vehicle with a loan, a bank or other financial institution pays for most or all of the vehicle up-front, and you agree to pay back the money over time.

Local Companies

Saks Bob Leasing
(248) 478-0500
35200 Gd Riv
Farmington, MI
Sellers Isuzu
(248) 426-8047
38000 Grand River Ave
Farmington, MI
Jim Janas Auto Sales
(313) 372-6518
16634 Rossini Dr
Detroit, MI
Seelye Wright of South Haven
(269) 639-8387
10420 M 140
South Haven, MI
Dukes Auto Sales
(989) 831-0300
302 S State St
Stanton, MI
Shelby Motor Sales Llc
(231) 861-4800
3001 W M 20
New Era, MI
Suburban Chrysler Jeep Used Cars
(248) 476-7900
24315 Haggerty Rd
Novi, MI
Highland Chrysler Jeep
(616) 559-5470
1350 28th St SE
Grand Rapids, MI
Moran Mitsubishi
(248) 353-0910
29310 Telegraph Rd
Southfield, MI
Graff Chevy Pontiac Olds
(989) 288-4545
9009 E Lansing Rd
Durand, MI

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Understanding Loans



When you purchase a vehicle with a loan, a bank or other financial institution pays for most or all of the vehicle up-front, and you agree to pay back the money over time. The amount of money you borrow from the bank is referred to as the "principal." The amount of money you contribute up-front is referred to as the "down payment" and usually varies from 10% to 20% of the purchase price of the vehicle. You can often purchase a new car without a down payment (if you qualify); used vehicles generally require a 20% or more down payment.



The payback period for a loan is typically up to five years, although some newer vehicles are being sold with longer-term loans. The financial institution will charge you "interest" for your use of their money. Interest rates vary depending on a number of factors such as your credit rating and where you live. Currently, new car loan rates start at around 8.5%, with used car rates about a percentage point higher. Manufacturers frequently offer lower loan rates as a purchasing incentive, but sometimes these are attached to conditions that may not work for you. Make sure you ask enough questions to make yourself comfortable when investigating various loan options.



 




Key features of loans




The primary features of loans are summarized below. Make sure you review our articles on leases and the differences between loans and leases before making a final decision.



 




  • You have ownership and equity in the vehicle. Your monthly payments are working to purchase that car and it's yours to sell or keep as long as you wish.



  • Gives you control over your vehicle.
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