Let’s begin by discussing how not to get the best auto loan available.
Many people make the mistake of walking into a dealership and focusing on finding a vehicle and negotiating a deal. When the time comes to pay, they walk into the dealership’s finance office and accept whatever loan they offer.
What many buyers don’t realize is that smart shoppers can save just as much money by knowing how to get the best possible loan. Therefore, here are three ways to make sure you get the best possible financing on your next automobile.
Work on Your Credit
Your credit can have a significant impact on the APR you get on your car loan. Before you start car shopping, it’s a good idea to check your credit score. While it can take years to improve your credit score drastically, it’s possible to boost your score quickly. For example, by paying off some credit card debt, your score could increase.
Get the shortest loan term you can afford.
New cars have become more expensive on average over the past decade or so. Car loan terms have become longer to keep monthly payments affordable. A 72-month car loan is now the standard. 48 or 60 month credits were more common. Loans of 84 months or longer are now available
A shorter loan term means you pay less interest. Shorter loans represent a lower risk to the lender, so they also tend to have lower APRs than longer-term loans. This can result in even more savings.
Shop around, not just for a vehicle.
As a final suggestion, one of the most important things you can do when getting an auto loan is to shop around. Applying at a handful of lenders have the same impact on your credit score as applying for just one loan.
A credit union or bank is an excellent place to start, and it’s a good idea to have a financing pre-approval when you begin shopping around. Many dealerships match or beat documented financing offers, so check your rates at a few lenders before you start the shopping process.