How a loan works Iowa

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

Rees Mack Sales & Service
(712) 944-5132
1709 Highway 20
Lawton, IA
Fred Hoiberg's Clarion Auto Center
(515) 532-2803
1501 Central Ave E
Clarion, IA
Cedar Rapids Suzuki
(319) 294-0200
1800 Dodge Rd NE
Cedar Rapids, IA
Mitsubishi of Des Moines
(515) 276-7373
9060 Hickman Rd
Des Moines, IA
Wiele Motor Company
(319) 728-2236
24487 Highway W
Columbus Junction, IA
Hawkeye Ford Inc
(712) 623-5147
2027 US Highway 34
Red Oak, IA
Betts Lexus
(515) 253-9900
2121 NW 100th St
Clive, IA
Jim Baier Inc
(319) 372-1012
2492 Highway 61
Fort Madison, IA
Jensvold Motor Co
(712) 852-2544
906 Grand Ave
Emmetsburg, IA
Pritchard Auto Co
(641) 843-3871
Highway 18 E
Britt, IA

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2007 Volvo XC70
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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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