Understanding Auto Financing

Dick Hannah is committed to providing complete transparency throughout the car buying process – including the auto financing process. Accordingly we have compiled information to help you better understand how creditors reach decisions that determine your auto financing offer. Decisions are based primarily on four factors:

1. Vehicle Information: Cost, year and mileage
2. Applicant Information: Residence, employment and income information
3. Credit History: Information found within your credit file
4. Down Payment: Cash and trade equity values

 
Earning the best possible auto financing offer requires selecting a vehicle that matches your budget while also providing the highest possible down payment on that vehicle. Compliance with those two factors will increase your likelihood of approval while simultaneously improving your offer and reducing your monthly payment.

Monthly Payment
Three major factors determine your monthly payment. They are listed below in the order of their impact:

1. Amount Financed: The remaining cost of the car after your down payment and the trade-in
2. Length of Contract: The amount of time required to pay off the remaining cost
3. Annual Percentage Rate (APR): Your interest rate

The following example illustrates the relationship between these factors

• Price of the new vehicle: $20,000
• Trade-in value of your current vehicle: -$5,000
• Down payment: -$3,000
• Amount Financed: $12,000
• Length of Contract: 60 months (5 years)
• APR: 6.00%
• Monthly Payment = $231.99