Buying your first vehicle is an exciting milestone. But it can also feel overwhelming. Between comparing cars, learning about auto loans, and decoding financing jargon, you might feel like you’re lost with no GPS.
You can get back on the map by learning just a few key concepts. They’ll help you shop smart, stay within your budget, and find financing that works for you.
Even better, qualified SECU members can take advantage of our limited time auto loan offer with no payments for up to 90 days† on a new or used auto loan, now through July 31, 2026.
Here’s what you need to know to buy with confidence.
Auto loans put car ownership within reach
You already have a vision of life with your new car. Here’s how you can make the dream a reality.
- Research vehicles and compare prices.
- Determine how much you can afford to spend on a car.
- Create a budget that includes purchase and ownership costs.
- Consider getting preapproved for financing.
- Test drive vehicles and choose the one that fits your needs.
- Finalize financing and complete the purchase.
- Make payments until the loan is paid in full.
When creating your budget, remember to include insurance, registration, maintenance, parking, and fuel costs when deciding how much vehicle you can comfortably afford.
Auto loan terms worth knowing
Auto financing comes with some specialized lingo. Once you break the code, you can negotiate with confidence. Here are some of the most common car loan terms and what they mean.
Term to know | What it really means |
Financing | Getting a loan. “Loan” and “financing” are interchangeable. |
Principal | The cost of the car itself (minus your down payment). |
Down payment | Money you pay upfront. It reduces how much you have to borrow. |
Interest rate | A percentage of the principal that you pay to the lender. Auto loan interest rates vary based on factors such as credit history, loan term, vehicle age, and lender. |
Annual percentage rate (APR) | The total annual cost of borrowing: interest and lender fees. |
Loan term | How long you have to pay back the loan (car loan terms are often 3-5 years). |
Taxes and fees | In addition to interest and fees on auto loans, Maryland buyers pay vehicle tax, registration, titling, and other dealer fees. |
Monthly payment | The amount you pay toward your loan each month, typically including principal and interest. An auto loan calculator can help you estimate monthly payments before shopping for a vehicle. |
Total car cost | Everything it costs to own the car, like financing, maintenance, insurance, fuel, fees, and depreciation. This can help you compare apples to apples when you’re deciding between cars. |
Secured loan | A loan where you pledge an asset (collateral) the lender can take if you don’t pay. In an auto loan, the vehicle is the collateral. |
Three factors that determine your loan cost
Think of your auto loan like a road trip. Three factors help determine how much the journey costs.
- Vehicle price: The more you borrow, the more you’ll repay over time.
- APR: Your APR affects how much you’ll pay in borrowing costs throughout the life of the loan.
- Loan term: A longer term may lower your monthly payment, but it can increase the total interest you pay.
For example:
- If you borrow $20,000 at 7% APR for five years,
- Your monthly payment would be $396.
- You’d pay $3,781 in interest.
- If you borrow $20,000 at 7% APR for three years,
- Your monthly payment would be $618.
- You’d pay $2,232 in interest.
How to prepare before you apply
To get a loan and an affordable interest rate, you’ll have to meet certain criteria. Lenders typically review a few key factors when evaluating an application.
- Your credit history and score
- Your income and employment history
- Your debt to income ratio (DTI)
- Your ability to comfortably manage a monthly payment
Why it pays to compare financing options
Many buyers focus on negotiating the vehicle price but spend less time comparing financing offers. Taking a few extra minutes to shop around can make a meaningful difference.
- Dealerships often work with lenders and may be able to arrange financing for you.
- Credit unions and banks also offer direct auto loans.
- Comparing APRs, loan terms, and monthly payments can help you find the option that fits your budget best.
Even small differences in loan terms can add up to significant savings over time. By exploring multiple financing options, you can choose an auto loan with confidence.
Preapproval can simplify the process
If you’re wondering how much you’ll be able to borrow, there’s a simple way to find out: preapproval. When you apply for preapproval, a lender reviews your financial information and provides an estimate of how much you may qualify to borrow. Here’s how it works.
- Apply for preapproval with your financial institution. Preapproval applications are similar to loan applications.
- Learn how much you’re preapproved for.
- With your preapproval amount in mind, you’re prepared for dealer negotiations.
While preapproval isn’t a final loan approval, it can be a helpful first step on your car buying journey.
Drive home happily with SECU
Buying a vehicle is a big decision, but it doesn’t have to be a stressful one. With the right information and a financing plan that fits your budget, you can shop with confidence and focus on finding the vehicle that’s right for you.
The fact that you’re researching financing before you shop already puts you on the right path.
If you’re ready to take the next step, our team is here to help. Ask about our limited time auto loan offer with no payments for up to 90 days† on a new or used auto loan through July 31, 2026. Schedule an appointment with one of our specialists to explore your options.
