Calculating the Cost of a Car Loan

There are two main sources of finance for your first set of wheels.
The first is a loan from the car dealership. Car dealers extend car loans to customers in their dealership, the funds for which are actually provided by banks.
First, call the dealer to check that you do in fact qualify for the advertised interest rate. Next, call the bank, as it may be that the bank offers a better rate independently of the dealer. In that case, you may prefer to borrow directly from the bank.
That leads to the second source of car loans, a loan sourced solely from the bank.
As banks will assess your credit rating and offer you an interest rate based on it, apply for loans with three different banks. When you have their interest rate quotes, read each loan’s fine print to choose the loan that best suits your needs.
One advantage of securing finance through the bank is that you know exactly how much you can afford to spend. Although a dealer will have to work within your financial limits, they are in the business of selling cars, not managing your budget. They may therefore push you to buy a more expensive car than you can comfortably afford.

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