When you are approved for a car loan the lender
typically will set the maximum monthly payment for which the loan is
approved. Generally, the maximum payment is either 12% to 18% of your
gross monthly income or 45% of you income less your monthly obligations.
items to include in the budget are the total cost of ownership of the
vehicle. When comparing the total cost of a vehicle consider such things
as insurance rates, gas mileage, and repair costs. To mitigate repair
costs we recommend including an extended service contract with the
vehicle at time of purchase.
with a poor Fico score pay higher finance rates than consumers with
Fico scores above 700. If you have a Fico score below 700 we recommend
buying a car that meets your basic transportation needs. Wait until your
Fico score improves before buying a more expensive automobile.
you have a low credit score we recommend selecting with the shortest
repayment term possible. This will allow you to trade out of the
vehicle, and finance another car at a better interest rate, much quicker
if your credit improves.
you have negative equity, consider buying an affordable new car with a
cash rebate. A lot of folks in Erie PA fall into the negative equity
trap. This cycle occurs by continually buying more expensive cars and
rolling negative equity from their pervious car loan into their next
fact the only way to avoid rolling money on to your new loan is to own
you car until the lien is paid, use enough money down to cover the
previous lien, or buy a car that you can pay off fast. We should also
mention that in most cases, if you the money you own on your used car
trade in is greater than the lien amount, it is probable that your new
auto loan payment will be higher than the payment on the vehicle you are