Buying a car can be stressful. Most Americans are not in the position to simply pay cash for a vehicle. At least a portion will need to be financed. It is convenient to simply work through the dealership and use their financing agent. However, that is not necessarily the best deal. Just like you shopped around for the best vehicle for your needs and negotiated the pricing, it is important to research the best auto loan rates for this major purchase.
Where to Look
At least 60% of Americans will opt for the convenience of allowing the dealership to finance their auto purchase. These folks don’t realize that there are frequently hidden markups that can account for around $1,000. Also, if the buyer hasn’t compared interest rates, they could be paying more. So, as proud as they are over negotiating a low price on the vehicle, they are losing in the financing end.
Start with your own bank. They will look at the usual credit reports, but also have available your history as a banking customer. Especially if you have an existing relationship or have had other loans through them, you may have some leverage. Even if you don’t, you will have a base from which to shop for rates. Since banks, especially large institutions, are rather conservative and bound by their own constraints, you will have a point of reference on interest rates and terms.
Credit unions can also be a good source. They are generally a bit more liberal and are willing to work with someone with less than perfect credit. However, you also need to allow extra time. You will probably need a face-to-face meeting and it make take longer to process the paperwork. It will also be a more personal relationship and allow you to explain any hiccups in your credit. If you have a pleasant personality and good attitude, it can work in your favor.
Online services is one of the best and easiest methods of financing your auto loan. There are certainly a number of sites to choose from. Many of these lenders have access to a number of different financing sources. Many of these companies also offer a rate calculator. It lets you insert values and will show you the interest rates and monthly payments based on the data you provide. Even if you talk with these companies, realize the final rates and options will be based on your own personal finances. They will look at your credit reports, payment history on credit cards, other outstanding loans, and income.
Of course, it is not always possible, but as much as you can, plan for that new purchase. You will be glad you have set yourself up for success.
Start by saving for the down payment. The larger the amount you pay up front, the less you will need to finance. That means two things: the sooner the car is yours completely and the lower the interest rate. Sometimes that means taking on overtime or a second job. There are online services that let you work from home in your spare time to help in this situation.
Improve your credit scores whenever possible. Some of your credit card companies offer a free assessment of your score. The best scores are over 760 to give you a reference point.
- Start by looking for errors. The most common errors are accounts that don’t belong to you and those that have been paid off but not fully recorded. After the errors are fixed, look at the report again to be sure that the correct data is still reflected.
- If you have been generally on time with all your payments except for a few, ask for an adjustment. If you are calm and explain how you are generally in good standing, you can sometimes get those late payments erased. It is worth a shot.
- Pay down or off as many credit cards as possible. That includes department stores. The lender will look at the ratio of the amount of your debt compared to the amount of available credit. Obviously the higher the credit, the better chance you have of securing a car loan at the best rate available.
Start watching the prime rate. No. You won’t get a loan at that rate, but it will show you whether interest rates are increasing, lowering, or remaining fairly constant. This can be a guide to how soon you need to lock in a good interest rate on your auto loan.
While you have the calculator available, try different scenarios. How much would you save in interest over the length of the loan if you only put down a few hundred dollars more? Instead of buying this year’s model, are there any new, last year’s versions available that they would like to move off the lot? What about a low mileage later model, but used, car?
Also look at how long you want to take to pay off the loan. Financing for more years will mean a lower monthly payment, but you will be carrying that debt for a longer time. However, if you are trying to improve your credit rating, making regular payments, or even doubles, will help your score. You need to closely review your income and expenses and see how this new loan will fit into your budget.
When fiddling with your budget, remember to adjust the insurance rates on this new car and see how that will impact the overall numbers.
When you get down to the time to shop, look at LendingArch. We have access to a wide variety of lending options. You will find the application process easy to complete and then you will be able to view the offers and compare them all at once. Our goal is to see you funded for the vehicle you need and want. Our representatives are here to help you reach your goal.