BMW  Honda  Mazda  Mercedes  Toyota  Auto Loans  Harley Davidson Bikes  4x4 Jeeps

Types of Auto Loans

There are two types of auto loans: long-term and short-term.

Lending companies usually offer long-term loans only for new cars. A long-term loan generally lasts for a period of 36, 48 or 60 months. Loans for used vehicles are usually only available for shorter terms of 24 or 36 months.

* Longer term plans carry a smaller monthly payment; however, you will pay more over the life of the loan. A three-year $15,000 loan that is lengthened to four years will decrease your monthly payment from $450 to $377. However, your interest rate will increase from 5 percent to 9.5 percent. The total amount you pay over the life of the loan would increase from $16,200 to $18,096. Our Auto Loan Early buyoff calculator helps you find out how much interest can you save by increasing your monthly payment (shortening your loan term).

* One potential pitfall of a long-term loan is that the car's value can drop below the loan principal amount if the vehicle is destroyed or stolen during the first year or two (see "The Vehicle's Value" section).

* Short term plans will mean higher monthly payments, but you will be charged less interest and will pay less overall.