When purchasing a new or pre-owned car, it’s essential to shop around for the best auto loan rates. Your monthly payment amount and whether or not you can comfortably make payments each month will depend on these rates.
An online loan matching service can help you locate competitive offers from multiple lenders without involving a hard credit pull. This method typically doesn’t involve applying for multiple loans within a short timeframe (usually 14 days), which won’t affect your credit score.
1. Shop Around
When shopping for a new car, refinancing your current one or considering leasing buyout, there are numerous ways to save money and get the best auto loan rates possible. It’s essential that you do some research before signing on the dotted line; make sure to do just that!
Start by using an auto loan calculator or other financial tool to determine how much you can afford each month. It’s also wise to factor in the total interest you’ll pay over the life of the loan, so that you know exactly how much each month will cost you comfortably.
2. Get Pre-Approved
Pre-approval is a great way to guarantee you get the most competitive auto loan rates when shopping for your next car. It gives you leverage in negotiations and allows you to focus on selecting an automobile instead of worrying about financing.
Shop around with local banks and credit unions as well as online lenders to compare interest rates, terms, and minimum credit score requirements.
Ideally, you should complete both your preapproval and loan application within 14 to 45 days to minimize any negative impacts on your credit score. Furthermore, doing all your loan shopping online is a wise idea as it allows you to find the best auto loans from multiple lenders at once.
3. Get a Cosigner
A cosigner can help you obtain the best auto loan rates. Typically, a family member or friend with excellent credit will cosign for you.
If you’re searching for a cosigner, research lenders that accept them and compare rates. Many credit unions and banks provide low-interest car loans to those with good credit histories.
A cosigner can give you additional leverage in negotiations. If the lender believes you’re a reliable risk, they may be willing to reduce your interest rate.
4. Consider a Used Car
If you’re in the market for a used vehicle, there are several ways to get competitive auto loan rates. Start by getting pre-approved with multiple lenders. This will guarantee you get the most favorable interest rate when shopping around for a vehicle.
Lenders take into account your credit score, amount financed and loan term when setting interest rates. They also take into account market rates and the vehicle you’re financing.
Typically, newer vehicles offer lower interest rates than used cars due to their less likely breakdown or depreciation; lenders can better predict their resale value.
However, if you can’t justify purchasing a brand-new vehicle or your finances are tight, used cars may be your best bet. Not only does buying used help you save money on monthly payments and interest charges, but it also allows for greater down payment contributions towards the car itself.
5. Make a Larger Down Payment
If your credit is good, making a large down payment can help you get the best auto loan rates. Lenders view borrowers who make large deposits as lower risk and will offer them lower interest rates in return.
A larger down payment can help lower your monthly payments. Lenders prefer seeing a large upfront payment as it demonstrates your dedication to finishing the loan.
The main drawback to making a large down payment is that it depletes your savings account. To combat this, many financial institutions offer automatic savings tools like Autosave from Chase that enable customers to set aside funds at specific intervals for meeting their financial goals.