Financing & Budget Tips

We've gathered some helpful car financing tips, whether you're a first-timer or just brushing up on things before buying your next car.

Helpful car financing tips

  • Choose a car at a price that fits your budget: If you're not sure what price range you're looking for, try our Car Payment Calculator to estimate your monthly payment ahead of time.
  • Maximize your down payment: Increasing your down payment lowers your monthly payment and may improve your offer and chance of approval.
  • Estimate what you can expect at trade in: If you're planning on trading your car in, having an idea of its current equity can help you estimate what car payment you can afford.
  • Have a monthly budget: Most financial institutions recommend that you spend no more than 15% of your gross monthly income (GMI) on your monthly vehicle payment. Examples:
    • $2,000 GMI = monthly car payment of $300 or less
    • $4,000 GMI = monthly car payment of $600 or less

Car financing terminology

  • Amount financed: the amount of credit provided to you.
  • APR: Annual Percentage Rate, or APR, is the cost of credit expressed as a percentage.
  • Down payment: the amount of cash or trade equity you apply to your purchase.
  • Equity: the difference between your trade payoff balance and its value. It may be positive or negative.
  • Finance charge: the total dollar amount you pay to use credit.
  • Retail installment contract: the finance agreement allowing for payment over time at a fixed monthly payment amount and rate.
  • Simple Interest: finance charge calculation based on the unpaid principal balance, number of days between payments and the APR.
  • Stipulation: additional documentation/action required to complete the transaction, like proof of income.
  • Term: the number of monthly payments provided for in the retail installment contract.
  • Total of payments: the amount you will have paid after you have made all payments as scheduled in the retail installment contract.
  • Total sales price: the total cost of your purchase on credit including finance charge, down payment and amount financed.