 TITLE: How Does Financing a Car Work? CONTENT: Things to Keep in Mind When Applying for a Car Loan\n---------------------------------------------------\nThe sticker price of the car isn't the only cost to consider when applying for car financing. Here are some key terms you need to be aware of.\n*   **Down payment**: The amount of cash you need to put down to take out the loan. If you have good to excellent credit, you may be able to qualify for zero-down-payment offers. When deciding your down payment amount, remember that the more you put down, the less money you need to borrow—and a smaller loan means you'll pay less interest over time.\n*   **Annual percentage rate** **(APR)**: Your loan's APR will include the interest rate for the loan as well as any fees or other charges to reflect the total cost of borrowing money. If you're weighing two loan offers, comparing the APR is a good way to assess which loan will cost you more in the long run.\n*   **Taxes**: State sales taxes on vehicles must be paid at the time of purchase. Depending on where you buy the car and how much it costs, this can add several thousand dollars to your cost.\n*   **Fees**: In addition to the fees to register your new car with your state's motor vehicle department, you may have to pay other fees charged by the dealership, such as destination or documentation fees.\n*   **Terms**: The term is how long you have to pay back the loan. Auto loan terms generally range from 36 to 72 months; you can even find 84-month auto loans. Choosing a longer loan term will lower your monthly payments, but at the cost of paying more interest over time. A shorter loan term means higher monthly payments, but lower interest payments overall; in addition, lenders often offer lower interest rates for shorter-term loans.\n*   **Monthly payments**: To repay your auto loan, you'll make set monthly payments that include both principal and interest. Experts advise keeping your monthly car payment to 10% or less of your take-home pay. It's important to keep the monthly payment manageable, because if you have trouble paying your car loan, it could hurt your credit score—and if you miss too many payments, your car might be repossessed. Ideally, look for the shortest loan term with affordable payments. END