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First Interstate Auto Loans

First Interstate Auto Loans

Next to a home, an automobile, new or used, is often the most important purchase people make in their lives, and, considering all of the costs associated with owning a car, it can also consume the biggest portion of their budget. Between financing costs, insurance, maintenance, and fuel costs, an automobile purchase involves a series of important decisions, each with its own set of factors requiring thorough consideration when calculating the total cost of ownership.

How Much Car Should You Buy?

For most people, their auto loan or lease payment is their second biggest monthly expenditure. Plus, over the course of the loan or lease, many of the additional costs of ownership, such as fuel, maintenance, repairs, and insurance can easily eat away at a budget that wasn't prepared for them. The biggest mistake people make with their car purchase is not factoring in the total cost of ownership, which can increase monthly car-related expenditures by as much as 25%.

  • Insurance costs: Add 5% to 12% depending on age, type of car, new or used, and driving record.
  • Maintenance and repairs: Add, on average, 10% to 15% per month (less if your car includes a pre-paid maintenance program).
  • Fuel costs: Can be as much as 30% higher per month if switching to a less fuel-efficient car.
  • Registration: Only an annual expense, but it still manages to catch many people off-guard. Amortize your fees over the year. $5 to $25 per month.

Your monthly auto expenditures can vary widely depending on the type of vehicle you buy. Newer model cars with better fuel efficiency and more highly rated safety features might sell at a premium, but they can also lower your long-term cost of ownership.

What are Your Auto Financing Options?

The one critical piece advice that all car buyers should heed is to have their financing lined up before car shopping. Cash is king on the car lot, and it can not only put you in a better negotiating position, it can substantially reduce your total cost of ownership.

The Car Dealer:

Last year, 80% of new car buyers financed their car purchase through a car dealer. While dealers can be a viable source of car financing, it would be very important to carefully scrutinize their financing offer before signing your papers. The important thing to know is that most dealers don't originate auto loans, which means you won't necessarily receive the lender's rate.

A word about zero interest financing: The 0% loans offered by car dealers can be very enticing. In most cases they are offered as an alternative to a rebate offer. You generally have to choose between 0% financing and a rebate of, say, $2,500. When you do the math, you may find out that $2,500 of less debt over five years is a better deal. These deals are only offered to the more creditworthy car buyers, so chances are if you qualify for 0% financing, you would also qualify for the best auto loan rates at a bank. Start there and do the math to compare your overall costs (including the loss of the rebate option).

The Bank:

Banks offer competitive and flexible auto loans as well. With a prequalified, private party auto loan from a bank, you are in the driver's seat when shopping and negotiating a car purchase. Of course, the rate you are offered will depend on your credit standing, but there are typically a number of financing options available to fit a variety of needs and credit situations. At First Interstate Bank we offer the following auto financing options:

New Auto Loan

You can finance your new car for up to 100 percent of the negotiated price, including taxes, registration, and extended warranties.

Used Auto Loan

The Internet has taken used car shopping to the next level, expanding your opportunity to find your perfect used automobile from private parties. Of course, they want to deal with cash buyers, so you don't want to start shopping until you have a prequalified loan that is as good as cash.

Auto Refinancing

Depending on the make, model, and year of your vehicle, you may be able to refinance an existing auto loan, which can lower monthly payment and free up some cash for other uses. You can may also be able obtain new terms that will enable you to accelerate the pay off of your loan.

Lease Financing

Lease financing may be the better option for people who plan to keep their cars for three to five years. Because you are, in essence, only financing the vehicle for the period of time you will be using it, the payments are typically lower than purchase financing. When considering lease options it's important to consider all of the lease terms, including the lease-end options, to ensure they meet both your driving and budget needs.

How Much Down Payment?

Even though banks can provide up to 100 percent financing to qualified buyers, as a general rule it's not advisable to finance a car if you are unable to put at least 10% down - 20% is better. The reason is that you will instantly lower your cost of ownership, and, equally important, you will drive off with some equity in your car, which should increase as you pay down the loan.

Get Prequalified

It's easy to get prequalified for your auto loan. Preparation is the key to getting a quick answer and that begins with checking your credit report and score. It's not uncommon to discover errors or credit activities that could be hurting your score. By taking steps to correct errors or improve your credit situation, you stand a better chance to receive more favorable loan terms. Your next steps are as follows:

  • Determine how much car you should buy. Be sure to calculate all long-term, cost-of-ownership factors such as insurance, registration, maintenance and repairs, and fuel costs.
  • Meet with a First Interstate Bank consumer loan specialist who can take your basic income, employment, and credit information.
  • If approved, you will receive a prequalification certificate.

If you are considering financing your new or used automobile purchase, we encourage you to visit a First Interstate Bank consumer lender to discuss which options would best meet your needs.

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