How to Save Money on Auto Loan Interest Rates

The BMW X5

Whether you are shopping for a car or already making payments on a car, you want to make sure you are getting the most for your money. Car loans can become quite expensive when you include the amount you pay in interest. With a bit of time and effort, you can find an affordable car loan with a reasonable interest rate. If you already have a car loan, you can still save some money by taking steps to reduce your interest rate. Here are some tips on how to make sure you get the best interest rate a lender has to offer.

Comparison Shop

Shop around. Not all lenders will offer you the same interest rate. Also, the interest rate offered by dealers will not necessarily be the most expensive. They have a bit of flexibility with the interest rate. Dealers can shave a few points here and there in order to make the sale. Interest rates from credit unions tend to be lower on average than banks as well.

Maintain Good Credit


Your credit score is an important factor in determining the interest rate you will pay. People with excellent credit histories generally pay the best rates. This is because lenders view them as the most likely to make the payments in a timely fashion. Credit scores and interest rates have an inverse relationship. As the credit score decreases, the interest rate increases. Over time, those with good credit will pay less interest than those with a slightly tarnished credit background.

Buy New


When searching for a car, if you can afford to, look to purchase a new one. New cars tend to command lower interest rates than used cars. Most new cars come with deals that are backed by the car company. This is an effort to get the new cars selling and out on the road. Used cars normally do not get this sort of backing, thus requiring more use of the dealer’s resources to sale.

Short Lease Terms


The longer the leasing period, the higher the interest rate. This accounts for the risk inherent in taking a longer time to pay off the loan. Generally, the payments associated with a 48-month or 60-month lease term are less. In order to save money, try a 24-month or 36-month lease term. You will have higher payments, but you will also pay less in total interest.

Refinance


Finally, you may be able to refinance your auto loan to get a lower interest rate. This may be beneficial if your credit has improved since your purchase of the car. Refinancing may increase the length of the auto loan, but the monthly payments will decrease due to the extended time period and the lower interest rate.

Do your research and take every opportunity to get the best interest rate you can find. If your credit is less than spectacular, take the time to get it back in shape. This will help tremendously in getting a good car loan interest rate. Take your time in making a decision. A wrong or misinformed choice could cost you thousands of dollars in the long run.


Search Cars for Sale

minivan
wagon
motorcycle

 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply