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## *Hello.* Seven Tips for Getting the Best Car Loan Rates Now that you know some of the best spots to look for a car loan, let’s talk about some more general strategies that you can exploit to make sure you land the best auto loan rates — wherever you decide to borrow. #1: *Shop around before you go to the dealer.* Never assume the dealer will offer you the best rate, especially if your credit isn’t perfect. Compare interest rates from outside sources (including banks, credit unions, and online auto-loan companies) and get pre-approved for the best loan you can find before you head to the dealer. It doesn’t mean you can’t go with dealer financing if they’ve got a great offer — it just means you don’t have to depend on it. The dealership may have an incentive for the applicant to finance through a dealer loan, which may carry a higher interest rate or less favorable terms than a loan from another lender. Be sure to check with your credit union to understand what rate and terms you qualify for before going to the dealership. -Stuart Graham, Assistant Vice President of Consumer Loan Operations for Sharonview Why is it important to get approved instead of relying on dealer financing? A few reasons: First, you’ll have more leverage to negotiate an even better rate with the dealer’s preferred lender, but the deal won’t depend on it. Second, you’ll know what kind of rates you should be able to get, so it will be easier to tell whether the dealer has added a markup on the interest rate they’re offering through whatever lender they’ve partnered with. Third, you know what you can comfortably afford going in, which reduces the chance that the dealer will upsell you on a more expensive car. #2: *Know your credit score.* Any lender–whether it’s a dealer, finance company or bank– will want to make sure that they can trust you to pay back any loan that they offer you. The easiest way they can do that is by looking at your credit score. A higher score suggests that you’re a lower financial risk. -Will Craig, CEO of LeaseFetcher Your credit score is also the single most important factor in what kind of interest rate you can land. Excellent credit means a better rate. Bad credit means a higher interest rate — if you can qualify at all. Andrew Rose HeadshotA good credit score saves you money on a lot of things– some of them unexpected. When shopping for an auto loan, a good credit score will mean that the interest should be lower, but that’s not all. In more states, a good credit score can also make your auto insurance premium a lot cheaper. You’ll save money up front and down the line. #3: *Sign up for a shorter loan term.* While it might seem like a longer term is the way to go because of lower monthly payments — who wouldn’t want to pay under $300 versus nearly double that? — remember to consider the long term. If you could pay off your loan in three years, you’d pay just $1,579 in interest. If you opted for a lengthy seven-year term, you’ll be paying $3,745 in interest — more than twice as much — not to mention budgeting for a car payment for four extra years. Luke Kinton HeadshotWith auto loans, since it is a depreciating asset, you want to pay the least amount possible in interest. If you are paying a 10 percent interest rate on a vehicle that is losing 20% of its value every year, you can become upside down quickly and be stuck in a massive car payment even after its economic utility has been exhausted. Beware of dealers who try to sell you on a car by showing you how low your monthly payment can be. This tactic simply boosts their bottom line by diverting your attention from the purchase price, driving it higher along with your loan amount. #4: *Buy new — maybe.* It’s usually easier to land a better interest rate on an auto loan if you’re buying a new car instead of a used one. Average interest rates for used cars can be significantly higher than they are for new cars. That’s largely because people seeking loans for used cars tend to have lower credit scores than people who need a new-car loan. Joel Ohman HeadshotOne hidden cost to buying a new car is that sometimes the new car has much higher insurance rates than your old vehicle. In all the excitement of researching which car to buy, this is something that many new car shoppers never even think to consider. Of course, the fact that new cars lose so much of their value immediately after you take possession is still a compelling reason to look at used cars, and that’s the reason why they’re the best deal most of the time. But be sure to consider the better financing you might receive on a new car while you’re making your decision. Similar sticker prices — for instance, if you’re comparing a new mid-range car and a used luxury car — could tip the balance in favor of the new car. #5: *Don’t pay for ‘extras’ with your loan.* Car dealers make a lot of money on all the little extras they will inevitably offer you. These extras could include extended warranties or upgrades like rust-proofing, fabric protection, and security systems. Most experts warn that purchasing these add-ons rarely makes sense. But rolling them into your loan makes even less sense — the interest means you’ll be paying even more for these extras in the long run. #6: *Exploit interest-rate discounts.* Many lenders will knock a little bit off your rate if you sign up for automatic payments or pay your bill online. Others may give you a discount gadai bpkb motor di bogor if you have a previous banking relationship with them or you’re purchasing a specific type of car. Don’t assume you’ll be told of these potential savings — always ask. #7: *Consider 0% interest deals, but do your homework.* Never say no to free money. A 0% interest auto loan is a good way to have an affordable payment and reserve your cash for other expenses or an emergency. Just make sure to look at the full terms associated with the loan and payment to ensure you can make it work in your long-term budget. You’re not going to find a 0% interest rate offer at banks or credit unions, but you may find them offered at the dealership by your car manufacturer’s lender. It sounds too good to be true, but if you have excellent credit, you may be able to nab such a deal. However — and of course there’s a “however” with this deal — you may have to take a 0% interest deal instead of another promotion, like a $1,500 cash rebate. You’d have to do the math to figure out whether the 0% interest would save you more than $1,500 over the life of your loan, or whether you would be better off taking the rebate and using a low-interest loan on the reduced amount. *How much should my down payment be?* Most consumers pay an average 5% down payment on a car. We recommend 20% to help reduce monthly payments and APR. Whether they’re buying a new or used car, most consumers pay an average 5% down payment. But if at all possible, consider saving up for a substantial down payment. We recommend around 20% — here’s why. The higher your down payment, the more you’ll be able to reduce your monthly payments and APR. And if you’re willing to make a substantial down payment, lenders may offer more favorable terms. Let’s say you’re taking out an auto loan for $10,000. You’ve got a credit score of 680, which is good. Your lender is willing to offer $10,000, to be paid back over 48 months with a 7.08% APR.
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