How to Get the Best New Auto Car Loan Interest Rates & Financing

By Guest Author

Although it may be tough to think about spending any more of your hard-earned money right now, economic downfalls have created a great consumer environment for buying a new car. If you have a steady job, great credit, and are confident it can fit into your budget, you may be ready to make the leap towards buying a new car. If you do make the decision to buy a new car and you are not paying for it in full with cash, one of the most important aspects of the process is getting a quality car loan rate. Here are 5 tips to help you get started:

1. Where to Find an Auto Loan
For starters, car loan rates found online can be considerably lower than what you’ll find at a typical dealership. Also, physically walking into a credit union or bank for a quote isn’t a bad idea as they will often be more flexible than some Internet sites. One quick word of caution: when you answer the questionnaire forms, make sure you truthfully answer all questions regarding your financial situation and history (false facts will only hurt you when they run your credit history). Ultimately, whether it be from the Internet, a credit union, or bank, you should have no problem obtaining a pre-approved loan that you can present to the car dealership to try to bargain for a better loan.

2. Compare Interest Rates
As you’re comparing auto loan offers, don’t forget that the most important aspect to consider is the interest rate. While there are 0% interest rate offers out there, don’t be discouraged if you don’t see them or qualify for them. My suggestion, however, would be to make sure to pay no more than 7% on your car loan. People today generally won’t pay more than 7% interest, but those with damaged credit may face rates as high as 20%. If you have damaged credit, take some time to improve your credit score rating before taking out an expensive car loan.

When it comes to the dealership loan offers, they generally offer a choice between 0% financing (if this is an option for you) or a rebate, but not both. While the 0% auto loan will often give you the best savings, sometimes it’s best to take the money rebate and use that towards the overall car’s purchase price to be able to use that money upfront.

3. Down Payment and Loan Duration
Other than your credit score, additional factors that can influence your loan rate are the down payment and loan duration. If your down payment is 20% or greater, you should automatically receive an extremely good rate. As far as duration, shorter loans (2-3 years) typically have lower rates to go along with the higher monthly payments, while longer loans (5-7 years) have much higher interest rates to go along with the lower monthly payments.

4. Refinance
If after all of you’re work you can’t get an attractive loan offer, one option is to accept a current offer, make timely payments, and then refinance for a better rate in one to three years.

5. Check the Lender’s Background
Lastly, before accepting any offer, make sure to check your lender’s profile and background by contacting the Consumer Affairs Office, your state’s Attorney General’s Office, or the Better Business Bureau.

Final Word
If you take the time to do the necessary loan research and explore all of your options, you can be sure that you’ll get the best auto loan interest rate. If a reasonable offer isn’t out there, delay your car purchase, and take the time to improve your credit score and save up your funds. Ultimately, buying a car, no matter how good the deal is, comes down to how it fits into your budget.

Edward Pacheco is an auto enthusiast who shares his knowledge about new cars, auto loans, and insurance at Automotive.com.


One Response (including trackbacks) to “How to Get the Best New Auto Car Loan Interest Rates & Financing”

  1. TonyB Says:

    Keep in mind that the dealership often makes a good chunk of money off the financing they offer. So if you walk in the door and they know right off the bat they won’t make anything off the loan it is going to be harder to get a great price on the car.

    Always work to get the lowest selling price on the car, then figure out the best financing. If you go in and say “I’ll only pay $XXX per month” the dealership will almost always build a deal in their favor.

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