Most new auto loans carry four to five-year terms, but you can often adjust the term to fit your needs. A shorter term loan generally results in a higher monthly payment than a longer term loan, but longer term loans charge more interest. Overall, it's less expensive to choose a shorter term if you can afford the payments. Some financial institutions charge loan processing fees while others process your loan at no cost. The APR is the actual interest rate you pay on your loan after all the fees have been included.
Prepayment penalties Ask if there are any loan prepayment penalties.
Some financial institutions add a penalty when you pay off your loan early. Others have no prepayment penalties. When choosing your loan, you can often decide to pay interest on the loan using a fixed or variable rate. The rate on a variable rate auto loan is determined by the index that the loan's interest rate is tied to, plus a percentage margin above the index that the financial institution uses. If you want a variable rate auto loan, ask how often the rate you pay is adjusted.