Information from the Washington State Department of Financial Institutions

Car Loans 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.

Here are the basics of auto financing to help you get you started.

Financing 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.

  • Bank or Credit Union
    Banks, credit unions, and other lenders offer auto financing. If you know the vehicle you want to purchase, you can get pre-approved for a loan at a specific interest rate. Shop around and compare rates.
  • Dealer Financing
    With dealer-arranged financing, you obtain financing from a lender through a dealership. The dealer collects information from you and forwards that information to one or more prospective auto lenders.

    If you were pre-approved for a loan from a bank or credit union, ask the dealer to match or beat the loan rate and terms.

Questions You Should Ask When Comparing Car Loans

  • 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?

Know Your Rights

  • Washington Lemon Law
    The Washington State Motor Vehicle "Lemon Law" is designed to help new vehicle owners who have substantial continuing problems with warranty repairs. Information from the Washington State Office of the Attorney General.
  • 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.

Car Loan Scams To Beware Of

  • Car Loan Modification Scams
    Beware of companies that offer to modify your car loans. There are many scams out there that you need to beware of. Information from the Federal Trade Commission.
  • Yo-Yo Sales or Bushing Scams
    Yo-Yo scams occur when a dealer tells the car buyer that the contract was canceled but the dealer will keep their down payments or trade-ins if the custom. Information from the Washington State Office of the Attorney General.

Car Loan Worksheets and Calculators

  • Auto Loan Worksheet
    From the Consumer Financial Protection Bureau. Helpful worksheet that helps you compare auto loans.
  • Car Loan Calculator 
    From the American Institute of CPAs. Helps you determine monthly payment.
  • Lease vs. Buy 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.

Additional Helpful Guides and Resources