How can you get the best auto loan for you? The auto loan with the lowest interest rate is almost always the best loan for your needs. Use the tips and strategies below to secure the best rates on your auto loan.
You Better Shop Around
Don’t assume dealers offer the best rates. Instead, compare rates from other sources, ensuring interest rates are added into the equation. Get a pre-approval for a loan with the best rates when you shop around.
Why Is Pre-Approval Important?
When you walk into the dealership with a pre-approval from one or more lenders, you gain the upper hand in the deal. You can negotiate better deals with the lender and have more leverage to use on the playing field. The pre-approval also helps you learn the interest rates that you can get with your credit, so you can determine fairly quickly if the dealer is trying to take you for a ride. You also gain assurance knowing how much money you can afford to spend, reducing the odds the dealer will try to sell you a more expensive vehicle.
What’s Your Credit Score?
Your credit score is a very important number. It determines the interest rate that you’ll get when you get an auto loan. The better your credit score, the better your interest rate. If you have bad credit, expect a bad interest rate, if lenders even approve you for a loan at all.
You can check your credit report at no cost each year. The FTC offers consumers a free copy of their credit report from the three major reporting bureaus each year. Obtaining additional copies is inexpensive and worthwhile, particularly before making a new car purchase.
Keep in mind that each time an auto dealer runs your credit, it reduces your score. However, you can generally make multiple inquiries for a vehicle loan over a two-week period and be hit only one time with the credit inquiry.
Short Loans Are Better Loans
When obtaining an auto loan, the shorter that you have the loan, the better. The shorter timeframe you have the loan, the less money that you will pay. Don’t fall head over heels when a dealer tells you how low the monthly payment is going to be. Your goal is to pay that car off as quickly as possible. To help reduce the length of your loan, there are various routes you can take to sell your used car, allowing you to make a larger down payment and therefore borrow less.
Should You Buy a New Car?
Although the costs of a new car are more than the costs of a used car, the interest rates on an auto loan are considerably less for a new vehicle. People seeking used cars usually have credit scores below average while those purchasing new vehicles have the best credit scores.
There’s a number of drawbacks to purchasing a new car. This includes depreciation as soon as the car is driven off the lot, longer time to own the vehicle, and even higher auto insurance rates. But, do consider a new car and the advantages that it offers as well, including the lower interest rates.
Avoid the Extras
There are usually many extras offered by the dealership, but don’t be so quick to say yes to them simply because they’re being offered to you and made to sound incredible. Whether it is a vehicle protection plan, upgraded rust-proof protection or a security system, the dealer will often charge considerably more for the system or upgrade than it is worth, especially if you are getting an auto loan.
Special offers make it easy to reduce the interest that you are paying on your new car. Be sure to inquire about any special discounts that might be available. Some dealers might give you a nice break if you sign up for automatic payment withdrawal or for being a loyal customer. Always ask for the savings that are out there so not to miss any dealers.
Always Do Your Homework
There are many 0% interest rates offered by auto loan companies. They seem wonderful from the outside and that is how so many are attracted to them. Consider that if it sounds too good to be true, then it probably is, and that there is some type of catch somewhere along the way that ups the cost of the car. But, do not assume that every such offer is this way. Check out the loan terms with these deals and learn how much you’ll save by using the offer.
Drive Into the Deals You Deserve
Soon, you’ll be sitting behind the wheel of an awesome new or used truck, car, or SUV, enjoying each trip near and far that you make. But, before you get there, be sure to drive into a deal that puts a smile on your face when shopping for a car. Whether you have the best credit or not, you can still get a great auto loan if you do the legwork.