Whenever you start shopping for a new car, you also have to start shopping for a new auto loan. The interest rate you get on your auto loan can determine what kind of car you are ultimately able to afford, as well as how much you end up paying for your vehicle after all is said and done. So what do you do to make sure you are getting the best auto loan rate possible?
Before you start talking to any potential auto loan lenders you will first want to get a copy of your credit report. There are a variety of locations online where you can get a credit report for free, or you can go directly to a credit reporting service and pay a small fee for a copy of your credit report and to see what your overall credit score is. Your credit report is how potential lenders are going to decide whether or not to grant you an auto loan, and if they do grant you a loan, at what interest rate. Check over your credit report and make sure all of the information on the report is accurate. Even a small inaccuracy can make a huge difference in your interest rate, so you want to make sure everything is as accurate as possible.
Once you determine what your credit score is, you can then do a little research on what going interest rates for auto loans are. If you have a good credit rating you can expect to get some of the better interest rates.
Many auto loan lenders will need to know what vehicle you want to purchase before granting you an auto loan. Once you have the vehicle you want to purchase in mind and know what your credit looks like, then you’re ready to start talking to lenders. A good rule of thumb for finding an auto loan is to try to get a loan from someone who has no vested interest in what you buy. Often times auto dealers will get kickbacks for having you finance your car with a particular lender, or charging you a higher interest rate than you should have to pay
The best place to start looking for an auto loan is your bank or credit union. Credit unions especially tend to have much lower rates than you would be able to get elsewhere. A bank can also give you a realistic base for thinking about what kind of interest rate you will have to pay for your auto loan. If your bank offers you a 5% interest rate, then you know that you’re getting ripped off when the dealer offers you a “low 7% interest rate”. Loan officers at your bank and credit union also have no vested interest in whether or not you buy a car, or how expensive the car you do purchase is, so they are more likely to be honest with you and try to get you the best deal possible.
If you have especially good credit you may be able to qualify for a no interest loan from your auto dealer. An auto dealer will always want to beat your banks financing, so if you can come in with a low interest rate offer from your bank, a dealer will often be willing to try to find you financing through one of their dealers at a lower rate than they otherwise would have offered you. The auto dealer doesn’t want you to get financing elsewhere, they want the money you pay in interest to come to them, and they will do what they can to try and make that happen. An auto dealer that can beat your banks interest rate helps the dealer while at the same time helping you and making the total cost of your vehicle less.
Like any purchase, with an auto loan be smart and shop around. Make sure you know what all of your loan options are before selecting one. You may be surprised at the deals you can find.