5 Ways to Get the Best Auto Loan Interest Rate

Your interest rate is an important part of your auto loan. Essentially, it’s the “price” for “buying” an auto loan; the total amount of interest you pay over the life of the loan is often what makes said loans worth issuing, for many lenders. So, to bargain down your auto loan interest rate, try these tips to get results.

Don’t Get A Loan Through The Dealership

When you’re looking to buy something, you don’t go to a store that sells just one kind of that product. But, when you get an auto loan through a dealership, that’s more or less exactly what you’re doing; many dealerships are just a middleman for you and another financial institution, and that’s simply not going to get you the best deal.

Furthermore, there are ways to drive up your interest rate you may not be aware of, and that unethical dealerships will take full advantage of. For example, it’s not only perfectly legal for the dealership to add a point or two to your overall interest rate, and collect that money directly, it’s perfectly legal for them to never mention they did so to you. So, don’t put yourself at risk; shop elsewhere for your financing and only go to the dealership when you have that in hand.

Try To Limit The Term

As a rule, shorter loan terms mean lower interest rates; lenders view the lower rates as an incentive to sign up for the loans, and the faster the loan is paid off, the better it is for everyone. So if the monthly payment fits into your budget, ask about shorter terms and their effect on your interest rate.

Buy New, If You Can

Car financing has a fairly simple mathematical formula at work, when it comes to your interest rate; the more you pay, the lower your overall interest. This is because you’re going to pay more interest with the larger purchase, meaning lenders have to lower their pricing a bit to properly compete. So, if you can buy new, consider it carefully, but don’t hesitate to do the math; a used car might technically have a higher interest rate but cost you less over the life of the loan.

Clean Up Your Credit Score

Another factor in determining your interest rate is your credit score. It’s true you can’t turn an indifferent score into a better one overnight, but you can get a free copy of your credit report annually from each of the three credit bureaus, and you should look it over for errors and mistakes. You should also, of course, get current with your debts if you’re behind; late payments may drag down your score, but getting caught up will help repair some of the damage.

Comparison Shop

Finally, you shouldn’t go to just one lender. Just like you shouldn’t buy the first thing you see, you shouldn’t buy the first loan you’re offered. Instead, leverage lender networks such as Federal Auto Loan to ensure you’re getting the most quotes to compare and contrast. That way, you’ll be sure to get the right loan, with the right interest rate, for you.

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