Finding the best auto loan rates is achievable, but it requires extensive research and planning. Interest rates are determined by several factors such as your credit score and what car you plan to finance.
Your credit history is the single most influential factor when it comes to determining your loan’s interest rate. But other elements like vehicle age, loan term length and down payment amount should also be taken into consideration.
Get a Co-Signer
When applying for a car loan, the most advantageous way to get an advantageous rate is to enlist the help of a co-signer. This could be someone close to you from family or friends that has excellent credit and is willing to assist in purchasing your dream automobile.
A co-signer can help reduce the amount of risk a lender takes by providing you with a loan. This is especially critical for those with poor credit or no credit history.
A co-signer can serve as an incentive to make payments on time, which in turn helps improve your credit score. But make sure they are someone trustworthy with a steady income.
Purchase a Used or Certified Pre-Owned Car
If you’re in the market for a vehicle but don’t want to shell out the high costs associated with new models, there are several alternatives. You can purchase or lease an used car, certified pre-owned (CPO), or lease a brand new model.
While CPO cars may cost more than regular used cars, the peace of mind you get from purchasing one is well worth it. Plus, many dealers provide benefits like monthly deals or special financing that could save you thousands during your car loan.
CPO vehicles are late-model, low mileage examples that have been thoroughly inspected and repaired to meet manufacturer standards. Usually, they come with a factory warranty as well.
CPO programs range in scope and cost from automaker to automaker and dealer to dealer, but typically provide free maintenance such as oil changes and tire rotations for a specified time or mileage limit. Many even include complimentary vehicle inspections.
Make a Larger Down Payment
A larger down payment can have multiple advantages. It could reduce your interest rate, make it simpler to get approved and shorten the loan term.
A large down payment will also prevent you from going upside down on your loan – meaning, owing more on your car than its worth. This is particularly important if you have bad credit.
Typically, a down payment amount of at least 20% of the purchase price of a vehicle is recommended. However, this number may differ depending on the car’s value.
A larger down payment will reduce your financing amount, enabling you to qualify for better auto loan rates and terms. Furthermore, it helps build equity faster which could protect you in case of trade-in or sale of your car. These advantages are beneficial both to you and your lender in the long run, so it’s essential that you weigh them before making a down payment.
Shop Around
When purchasing a new or pre-owned vehicle, finding the best auto loan rates can be an important part of saving money over its life. Rates differ between lenders, and your credit score also plays a role in determining what rate you receive.
When searching for the best rates, take into account both the APR and any fees, loan term, and monthly payments. Compare quotes from different lenders and look out for prequalification offers that could give you a negotiating advantage at the dealership.