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9 tips to get a good deal on your first auto loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with financial calculators and interactive tools that provide objective and unique content. We also allow you to conduct research and compare data for free – so that you can make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies who pay us. This compensation could affect how and when products are listed on this website, for example for instance, the order in which they appear in the listing categories in the event that they are not permitted by law for our loan products, such as mortgages and home equity and other products that lend money to homeowners. But this compensation does have no impact on the content we publish or the reviews appear on this website. We do not include the universe of companies or financial deals that may be accessible to you.
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6 minutes read. Published September 30 2022
Written by Allison Martin Written by
Allison Martin’s work began over 10 years ago as a digital content strategist. She’s been published in several leading financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Helen Wilbers Edited by
Helen Wilbers has been editing for Bankrate since late 2022. He is a fan of transparent reporting that allows readers to successfully land deals and make the best choices for their finances. He is a specialist in auto and small business loans.
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Making plans to purchase a vehicle for the first time could be to be one among the toughest events out there. With so many factors to think about regarding the actual car, the loan could fall by the side. Don’t let it. Finding a car requires a lot of researchhowever, the more research you do now, the better off your financial situation will be in the future. An interest-free rate can be the key to a low-cost car no matter the car you decide to purchase. 1. Be honest with your budget. The main concern when you purchase a car ought to be the price. Be aware of the amount you spend each month, and the total interest that you will pay to . But you should also consider the expected maintenance as well as insurance and fuel costs. All contribute to the amount you’ll spend. Experts recommend spending no greater than 10% of earnings on your car. Use an to estimate the amount of monthly payments and the total amount paid. You can then look up resources such as Edmunds or Kelley Blue Book to see what you can expect to pay for the vehicles you’re considering buying. What you should take away from this is
Review your financial situation and decide if you are not stretching your budget too far.
2. Keep in mind that longer terms are an increase in cost. The price of a automobile is increasing. It’s not hard to find a loan that lasts for six or seven years, but they do have a significant downside. A longer loan term does mean an lower monthly cost- which could be helpful when you’re trying to stay within your budget- but it results in higher interest rates overall. Even if you purchase an inexpensive car, you can quickly become debt-ridden or owe more than what it’s worth. For that first car loan pick the shortest period you can reasonably afford each month. It could mean you need to cut back in some other ways, however it’s by far the safest choice to avoid having to pay more for your car than it’s worth. It is the most important lesson to take away
It’s likely that you’ll save money on interest rates by choosing a short loan term and reduce the chance of becoming upside down on your vehicle loan.
3. Check the credit score and report. credit rating is one of the most important element that lenders take into account in determining your interest rate. To get a good deal, you will need good credit. Also, you’ll need a history of on-time payments. If you’ve not had the opportunity to improve your credit score and track record, you’ll have a harder time finding a good deal. You may have to use the car loan, which will mean a higher interest rate. If you’re able to put off paying on your vehicle loan make sure you build a history of on-time payments. A lower ratio of debt to income indicates to lenders that you are able to manage your finances. Create a positive financial picture for your lenders to score an excellent deal. The most important thing to remember is
Make an effort to improve your credit score before applying to get a competitive interest rate on your auto loan.
4. Shop more than one lender Comparing lenders is as critical as comparing cars for a great deal. The types of lenders you can choose from include: : If you have a poor or zero credit, then you may be qualified for a first-time buyer program offered through a local credit union. You’ll need to be a credit union member to apply for loans and other financial services, so ask about how to join prior to proceeding. Big banks: Consumers with an existing association with an established bank might be eligible in the auto loan. As a first-time buyer it is possible to pay more expensive rates. The online lenders typically have less strict eligibility requirements than traditional banks. This is great news if you lack credit history or have a good score, however, you may expect a higher interest rate to mitigate any risk posed to the lender. Marketplace lenders platforms feature an extensive network of lenders. The application you submit is shared with the community so that you can see potential loan offers from lenders that might be a good match. Capitalist lenders may get financing through or finance company that is part of the manufacturer of your vehicle. They often feature auto loan programs for current students as well as recent graduates of college. Every lender offers different rates and methods of determining who is eligible for what terms. It is essential to shop around and apply with multiple lenders. This will allow you to determine what you can qualify for, what you could spend and what you will be expected to pay every month. It is a key takeaway
Doing some research will help ensure that your get the most competitive price on a car loan.
5. Get preapproved Shopping around has an added benefit that it will likely end with a period of for up to 30 days. If you apply for preapproval, the lender creates an inquiry that isn’t going to impact the credit rating of yours. You’ll have time for a visit to dealers as well as test automobiles without the stress of securing financing. Getting preapproved gives you the advantage in negotiations. Dealer financing can be expensive because dealers mark up their rates in order to earn profits. But when you head to the dealership with a preapproval form, you may be able to negotiate a good deal on in-house financing, if that’s your preferred route to take. Some dealers also offer the option of either low-interest or financing. If you’ve achieved unbeatable rates with another lender Your option is simple: reward yourself with a discount. Key takeaway
Preapproval helps you narrow down the pool of lenders and reduces the impact on your credit score.
6. Decide between new, used or leasing Lenders provide different rates on automotive loans for . Lessors use their own method of calculating the monthly payments — called the factor rate and it is important to study the factors before you take this step. If you’re planning on purchasing the latest model, be aware that they generally come with lower rates across the all levels. However, newer cars are also significantly more expensive and will lose value faster through depreciation. Therefore, even though you’ll have to pay higher interest rates for a used car but you can still save cash. Key takeaway
New cars generally come with more competitive loan terms than used cars however, your total cost will be higher.
7. Find specials offered by the manufacturer. Many manufacturers offer first-time car buyer programs. Many offer incentives for college students and recent graduates. If you’re thinking of purchasing a brand new car, have the income or credit that can back it up and want in-house financing it is sensible to check if you could save a few dollars. Manufacturers also offer rebates, and special leases on new models. Be on the lookout for these. You will be more limited in the items you can purchase and how you can spend it. However, if you have a clear idea of what you’d like and have excellent credit, manufacturers specials could save you money on your first auto loan. What you should take away from this is
Talk to the dealer to find out whether you’re eligible to receive financing incentives when buying a brand new vehicle.
8. Make use of a co-signer or co-borrower If you do not have stellar credit, a could of getting a good deal. The lender will look at the credit score of both parties in deciding whether or not to finance your vehicle. The vehicle will be liable for the loan if you cannot pay on time. However, a co-borrower shares ownership of the vehicle and equal responsibility in this loan together with the borrower. Whatever you choose to do, the individual should have good or excellent credit and consistent source of income that meets the lender’s minimum requirement for approval. Key takeaway
A co-signer or co-borrower can improve your odds of approval and enable you to secure an even better rate on the car loan.
9. Have a big down payment. Once you’ve figured out what you can afford to spend starting with a minimum of 20 percent of your vehicle’s total cost. If you can’t afford this amount, aim for a down payment of minimum 10%- or whatever you can afford. Try Bankrate’s tool to find a figure that works for you. It may be tempting to purchase a more expensive vehicle however, first-time buyers — and every car buyer should use a down payment to cut down on the amount they have to finance. A larger down payment improves your odds of getting a great interest rate, reduces your monthly payments and decreases the amount of interest you’ll be paying during the loan’s term. Key takeaway
A higher down payment may allow you to qualify for better loan terms. Additionally, your monthly payments will be less expensive.
The next step to getting a good deal on your first auto loan is to remain open to shopping around and be patient. You can get the best rate when you compare lenders, saving up the cost of a downpayment and improving the credit rating. Learn more
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Written by
Allison Martin’s work began over 10 years ago as a digital media strategist, and she’s since published in numerous prestigious financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Helen Wilbers Edited by
Helen Wilbers has been editing for Bankrate since the end of 2022. He values transparent reporting that allows readers to successfully get deals and make best choices for their finances. He is a specialist in small and auto loans.
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