Cars/Motorcycles

How to get the best car loan rates: expert tips

and get the best car loan rates

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This guide outlines tactics to get the best car loan rates and save money on your loan.

Owning a car is essential in modern society. If you live in a suburban area, it is difficult to get anywhere without a vehicle. But car ownership means expenses, from maintenance and repair fees to fuel and upkeep. Cutting the cost of your auto loan by getting the best car loan rates can save you hundreds of dollars in interest and monthly premiums.

There are several ways to reduce the cost of your car loan, starting from improving your credit score to refinancing your auto loan. Putting in the extra effort will reward you in the long run. The savings you get from lower premiums can fund costly repairs and maintenance fees. It may even contribute to the down payment of your next car.

How to get the best car loan rates

Here are some ways to reduce your cost and get the best car loan rates.

1. Improve Your Credit Score

A high credit rating will get the best car loan rates. Lenders are less likely to give favorable terms if you have a poor credit score because it reflects a troubling repayment history. 

If you are not in a hurry to purchase a car, work on improving your rating. Pay off as much debt as soon as possible. Avoid skipping your monthly payments. You can also request a credit check and review if there are questionable items that you could contest. Look for debts you have already paid or items that you have not bought but are credited.

2. Save Up for a Down Payment

You can greatly reduce and get the best car loan rates by providing a significant down payment. Paying for more than 10% of the vehicle’s selling price in cash will reduce the loan amount. A reduction in total loan amount means lower overall interest charges.

A significant down payment can also make your loan terms favorable. You can get shorter payment schemes, for example. By paying upfront, your total debt is reduced by a significant amount. This makes the monthly premiums of a shorter loan term more affordable. 

3. Shop for Loans, Negotiate Hard

Get a quote from at least three lenders and negotiate hard to and get the best car loan rates. Before you do this, ask your trusted bank or credit union for preapproval. The financial institution will check your credit, your economic capacity, and your monthly income. The bank will tell you how much they are willing to lend you and their terms.

You can use this preapproval to negotiate terms from other lenders and car dealerships. Because the initial terms you get from the bank act as a baseline, you can use it to push loan providers to give you a more favorable deal.

4. Trade Your Vehicle

If you have an existing car, trade it in to reduce the total amount of your purchase. The dealer will assess the value of the vehicle you are trading in and subtract it from the selling price of the car you are buying. A lower overall cost means you need to borrow less, cutting the cost of your premiums.

The reduced net cost of the new car can bring you additional savings in the form of reduced sales taxes. Since most states only tax the net cost of the purchase, trading in your existing car can save you hundreds of dollars in taxes.

5. Choose a More Affordable Car

Buying a cheaper car also means you’ll get more affordable loan terms and and get the best car loan rates. To avoid overspending on a luxury car, it’s best to have a purchase plan that identifies your average automotive needs and budget. You can easily cross out vehicle features that are above your basic needs with excessive costs.

If you mostly drive to your office and back home, you might not need an expensive luxury SUV. It’s better to stick with a functional car from a reliable brand. The savings you’ll get from lower monthly premiums can get you into a better financial position. Combine this with the trade-in value of a well-maintained car, and you can upgrade your purchase after four or five years.

6. Go for Shorter Loan Terms

Longer loan repayment of six or seven years might tempt you with its lower monthly premiums. Avoid this, as you’ll be paying more interest throughout the debt. It’s better to get the best car loan rates with a shorter term, as these come with lower interest rates.

Because your car naturally experiences wear and tear as you use it, its value lowers over time. A longer loan term might mean you’ll eventually pay for more than your car’s value. Shorter repayment allows you to build equity in car ownership, which puts you in a better financial position.

7. Refinance Your Car Loan

If you acquired a car loan with a poorer credit rating, you could get better terms by refinancing to and get the best car loan rates. This means getting a debt with more favorable conditions to pay off your existing debt.

By refinancing, you can decrease your monthly expenses by paying for your previous debt with a loan that has a lower interest rate. You can also get out of a lengthy debt arrangement and configure your new loan to pay it in a shorter time. If the economy also took a turn for the better, that means interest rates are lower on average. Getting your car loan refinanced can take advantage of that situation.

8. Look for Alternatives

Looking for a car at a dealership lot might not be the cheapest option to and get the best car loan rates. The vehicles in the dealer’s inventory have features you might not need and aftermarket parts that are not optional to purchase. Alternative purchase options might be cheaper and cut your car loan costs significantly.

Consider alternatives such as factory ordering straight from the manufacturer, car auctions, or private sales. Not all lenders cater to these options. You might need to cast a wider net when shopping for car financing, along with alternative purchasing options.

Conclusion

The best way to and get the best car loan rates is to lower your overall purchase price. The less you borrow, the more you can negotiate better loan terms. When you get lower interest rates, you are set up to have a better financial position. Your savings can go to maintain your new car, retaining resell value. Lower monthly premiums also mean more can go to your down payment for your next car.

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