Whether you are purchasing your first car or upgrading to a newer model, understanding the specific details of your financing agreement is crucial. The terms and rates attached to your auto loan dictate not only your monthly expenses but also the total cost of the vehicle over time. By breaking down these elements, you can make informed decisions that align with your financial goals and budget.
Overview of Auto Loan Terms
The “loan term” refers to the specific length of time you are given to repay your vehicle loan in full. These periods are typically measured in months, with common options ranging from 36 months (3 years) to as long as 96 months (8 years).
Choosing a loan term involves a trade-off. Shorter terms mean higher monthly payments but generally lower interest rates and less total interest paid. Longer terms offer significantly lower monthly payments but typically have higher interest rates, increasing the overall cost of the loan.
Auto Loan Rates Explained
When comparing loan offers, note the Annual Percentage Rate (APR). Unlike a base interest rate, the APR gives a fuller picture of borrowing costs as it often includes certain fees.
Your auto loan rate is set by factors like credit score, income, and vehicle details, as lenders assess risk. Strong credit typically secures the best rates, though the car’s age and mileage are also considered.
First City Credit Union’s Terms & Rates
At First City Credit Union, we offer flexible terms designed to fit a variety of budgets. We believe in transparency, which is why we provide clear examples of our term lengths and associated APRs.
Current Terms and Rates (New & Used):
- 36 Months: Rates as low as 5.49% APR
- 48 Months: Rates as low as 5.74% APR
- 60 Months: Rates as low as 5.99% APR
- 72 Months: Rates as low as 6.24% APR
- 84 Months: Rates as low as 6.74% APR
- 96 Months: Rates as low as 7.24% APR (New autos only)
Note: Rates are subject to change. The 96-month term is exclusive to new autos or recent models with less than 5,000 miles and a minimum loan amount of $40,000.
We also offer unique opportunities to save. For example, borrowers with a Loan-to-Value (LTV) ratio of 80% or less may qualify for a 0.50% rate discount. Conversely, vehicles with higher mileage (140,000 or more) may see a slight rate increase of 0.50%.
How Terms Impact Monthly Payments
Understanding how the term length changes your payment can help you budget effectively. Based on payment examples per $1,000 financed:
- A 36-month term at the lowest rate would cost approximately $30.19 per $1,000 borrowed.
- A 96-month term at the lowest rate would cost approximately $13.74 per $1,000 borrowed.
While the 96-month option cuts the monthly payment by more than half compared to the 3-year option, it is important to remember that you will be paying interest for five additional years.
Choosing the Right Loan Term and Rate
Selecting the right financing package requires a look at your personal finances.
- Assess your budget: Determine exactly how much “wiggle room” you have each month.
- Vehicle retention: Consider how long you plan to keep the car. It is generally unwise to have a loan term that outlasts your ownership of the vehicle.
- Compare offers: Always look at the APR and total cost, not just the monthly payment.
Tools and Resources
To help you crunch the numbers, we encourage you to use the First City Credit Union Auto Loan Payment Calculator. This tool allows you to plug in different loan amounts, terms, and rates to estimate your potential monthly payment instantly. Also, using rate comparison tools and checking your credit score beforehand can give you a better idea of what you might qualify for before you apply.
Why It Matters
Understanding these concepts is the best defense against costly mistakes. Borrowers who focus solely on achieving the lowest monthly payment often end up paying significantly more in interest or finding themselves “upside-down” on their loan (owing more than the car is worth). Federal law requires lenders to disclose the APR and key loan details, ensuring you have the information needed to make a financially sound choice.
Contact First City Credit Union for Auto Loan Terms and Rates
If you are ready to finance your next vehicle or have questions about which option is right for you, our team is here to help. We can guide you through our current offers and help you find a structure that suits your needs. Visit us online or contact us today to get started.
