If you’re a typical American, you probably replace your automobile every five years. It’s vital to try and acquire the lowest rate possible on your car loan because the interest can mount up over time, especially on a five or seven year loan, when purchasing a new car, truck, SUV, or van. So you can search for a car loan with a low interest rate.
1. Realizing the current market prices
You can’t tell if you’re receiving a decent deal on a car loan until you know what the market rate is. Find out the current vehicle loan interest rates by doing some research online, calling around to local banks, or talking to friends and family.
Make sure you’re comparing apples to apples by factoring in things like loan term, as rates tend to be lower for longer repayment periods. Your interest rate will also be influenced by your credit history.
2. Obtaining a loan prior to making a purchase
The dealer will try to pressure you into “dealer financing” if you wait until you come to the lot to figure out how to pay for the automobile. That’s because he typically includes extra “padding” in his financing, so you end up paying more and he makes more money.
When compared to the interest rates offered by banks, credit unions, and internet loan companies, dealer financing often carries a premium of around 3 percentage points. You should secure a loan before going car shopping. The auto dealer will know they can count on you as a customer, which will give you more leverage when haggling over the price.
3. Doing some window shopping
Collect bids from numerous financial institutions. If you need money, look into local credit unions, online loan services, and other financial institutions. The best way to find the best loan is to compare rates, conditions, and fees from multiple lenders. Tell them you’ve received better offers from elsewhere and that you’re now shopping around. To win over your business, companies might offer you a discounted rate or waive certain expenses.
Shopping around doesn’t have to hurt your credit score, especially if you use an online lending tool that lets you compare rates from various banks and loan firms at once.