Posted on February 14, 2022 Last Updated: September 4, 2025
Purchasing a vehicle, whether it’s your daily commuter or a family SUV, remains one of the biggest financial moves most people make. Before you sign for your new car, here are four things to consider.
1. Choose Your Financing: Direct vs. Dealer
Direct financing means that you secure a preapproved loan from a bank or a credit union before hitting the lot. Comparatively, dealer financing is when the dealership arranges a loan for you; while this may be more convenient in the moment, this can be pricier in the long run.
2. Understanding Loan Basics
The three main elements of your auto loan are the principal, term, and interest rate. We’ll discuss each of these below:
• Principal
The actual amount you borrow, which can be reduced by your down payment and your car’s trade-in value.
• Term
Your repayment window. The longer the term, the lower the payment, but the higher the interest.
• Interest rate
The cost of borrowing your principal; the higher your credit score, the lower your interest rate, and the less you pay in the long run.
3. What Car Can You Afford?
Financial experts typically recommend that you place a down payment of at least 20% and try to keep your loan under 4 years (48 months). Additionally, make sure to keep your vehicle costs to 10% of your gross monthly income.
4. Shop Smart
Make sure to come prepared with your identification (ID, passport), income (pay stubs/bank statements), and a car insurance company for insurance. If you’re eligible for pre-approval, this can also help signal dealers that you are a serious buyer. Don’t overlook used cars and watch out for expensive bundles that the dealer may try to get you to buy.
KEMBA Offers Auto Loans
Do you live in Central Ohio? KEMBA offers low rates and flexible terms on auto loans for new and used cars with personal 1:1 service to help meet your unique needs. If you compare our auto loan interest rates to other banks and lenders, you’ll find competitive everyday rates and even lower rates for KEMBA Advantage members. If you have questions about getting the process started or getting pre-approved, our dedicated local associates are here to help. Call 614.235.2395 and select Option 4 for more information.