Information from the Washington State Department of Financial Institutions

Car Loans: The Basics

Figuring out how to pay for a new car is a vital part of the car-buying process.

While not as fun as choosing your car's make and model, it's important to understand the basics of getting a car loan.

Determining What You Can Afford

Before you choose your new car, take a look at your budget and determine what you can afford. If you are going to take out a car loan, factor in what a monthly payment will do to your finances and budget.

Coming Up With A Down Payment

Most lenders will require a down payment. Financial experts have long said that that 20 percent is the magic down payment number when you're buying a new car. But the vast majority of people are making far smaller down payments. An Edmunds analysis of new- and used-car purchases showed that the average car down payment was about 12 percent.

Comparing Finance Options

You can get a car loan from a lender, like a bank or a credit union, or through dealer financing. Compare loan offers from several lenders. Questions you should ask:

  • What is the annual percentage rate?
  • How much will I pay every month?
  • How many payments do I have to make?
  • What is the total amount I will pay?

Many car dealers offer financing. Before walking into a car dealership, compare the costs of dealer financing to the cost of a loan from a credit union or bank. Then decide what the best deal is for you.

Car Loan Worksheets and Calculators

Worksheets and calculators to help you when shopping for a car loan.

Auto Loan Worksheet
Helpful worksheet from the Consumer Financial Protection Bureau

Car Loan Calculator
Calculator from the American Institute of CPAs helps you determine monthly payment.

Lease vs. Buy Calculator
Calculator from the American Institute of CPAs helps you compare leasing vs buying.

Auto Loan Early Payoff Calculator
Calculator from the American Institute of CPAs helps you see how much money you can save by increasing your monthly payment.

Helpful Resources

Helpful links to additional resources.

Guide to Shopping for an Auto Loan
Helpful guide from the Consumer Financial Protection Bureau.

Car Loan Financing Options
Information from the Consumer Financial Protection Bureau about the different kinds of car loan financing options.

Auto Loans FAQs
From the Consumer Financial Protection Bureau. Answers to frequently asked auto loan questions.

Buying A Car: Your Rights
Information from the Washington State Office of the Attorney General about your rights when buying a car in Washington State.

Washington Lemon Law
Information about the lemon law from the Washington State Office of the Attorney General.