Tips to Securing a Good Financial Deal for Your Next New Vehicle The Smart Way—on Your Terms
Some consumers will spend days making sure they get the lowest price on a car but neglect to shop for the best auto loan.
That’s a mistake.
One of the biggest mistakes people make when buying a new car is forgetting to include the cost of auto financing in the total price.
For example, if you’re buying a new Honda Civic, the difference between “sticker price” and the dealer’s invoice price (what the dealer paid for the car) is about $1,500. If you negotiate well, you could save $1,000 or more on the price of the car.
If you then finance the car for four years at six percent with nothing down, you’ll pay over $2,000 in interest. Financing the car for three years at four percent with a $1,500 down payment, however, can save you over $1,000.
If you’re willing to negotiate the price of the car, you shouldn’t ignore the rates and terms of your financing. I made this mistake the first time I bought a car and vowed never to do it again.
If you’re in the market for a new car, don’t wait until you’re in “the box” (what some dealers call the offices where you finish the paperwork) to think about your financing.
Car shoppers who don’t have financing in place when they visit the dealership to buy are vulnerable to whatever terms the dealer offers, which might have a much higher interest rate than they could get elsewhere. And because dealers often mark up the interest rate of a loan above what shoppers actually qualify for, those buyers could wind up spending hundreds of dollars more over the course of the loan.
Let’s face it – you want a car, not a car loan. But unless you’ve got a rich uncle with a large amount of cash to pay for one outright, you’re going to need a car loan. The good news is that you have options! This article is focused on only one thing – Simple way to find the best car loan for you on Your Terms.
How you can reach top rated companies that work with all credit types and are affiliated with hundreds of lenders, dealers and loan networks. These companies want your business; they have quotas to make, monthly goals to reach, and you benefit from this. You’re in control; it’s your choice!
What is your Next Car going to Be?... With a simple form submit, You can apply for a Car Loan, Get Approved and Hit the road in your new car!
Ultimately, if you’re looking for a car loan, you’ll want to balance its total cost with the monthly payment you can afford. But focusing on the monthly payment could increase the chance that you’ll end up with a bad deal. Be smart: Determine what you’re willing to spend before setting your sights on your dream machine.
Below are CR’s tips on what to look out for when getting a car loan.
Keep an Eye on a Loan’s Total Cost
When comparing auto loans, the figure to focus on is the annual percentage rate (APR). A lower rate can produce significant long-term savings. For example, a three-year $15,000 loan with a 5 percent APR would save you almost $500 overall compared with the same loan at 7 percent.
Another key consideration is the length of a loan, which can significantly affect both your monthly payment and the total cost of your financing. A shorter term means higher monthly payments, but less money will be paid overall. Try to keep the length of the loan as short as you can afford.
A three-year loan costs far less overall than a five-year loan. For example, if you borrow $15,000 at a 6.5 percent APR for 36 months, your monthly payment will be $460 and the total interest will be $1,550. The same auto loan stretched out to 60 months would lower the monthly payment to $293—more than $160 less—but nearly doubles the interest you’ll pay to $2,610, an increase of $1,060. And that doesn’t even take into account that longer loans often come with higher interest rates.
Save money on auto financing by knowing your credit score and leveraging competing loan offers at the dealership. Put money down, keep the term as short as you can afford, and—of course—don’t buy more car than you can afford.
Long-term auto loans also lengthen the time before you begin building equity in the vehicle. For example, with a 60-month loan, it might take 18 months of payments or longer before the car is worth more than you owe on it. This means that if you want to trade in or sell the car early, the price you’ll get won’t cover the amount you still owe, a situation that’s often called being upside down. The same is true if the car is stolen or destroyed; your insurance payment probably won’t be enough to pay off the remainder of your loan.
Shorter loans reduce the amount of time you can be under water. For example, with a three-year loan, you could build thousands of dollars of equity in the vehicle by the end of the first year.
You can avoid being upside down by making a significant down payment. We recommend that you have a trade-in or down payment of at least 15 percent of the total cost when financing the purchase of a new car.
Where to shop for an Auto Loan
Walking into a dealership with a guaranteed auto loan in your hand gives you bargaining power and flexibility. It also helps you avoid the common sales tactic of mixing up the vehicle price with financing costs. On the other hand, going into the dealership without doing research on how you are going to finance your purchase is setting yourself up to overpay.
How Easy Is It to Get A New Car? We’ve Got Quick Solutions!
Two top rated places to start your search for a loan are at Choice-carloans.com and Web2-carz.com. These website shows you the current average loan rates nationally. And by entering your ZIP code, you can see some offers tailored specifically for your area.
A dealership may be able to offer you the best financing terms. But you should still do your homework beforehand by carefully shopping for the best loan offers so you have a comparison point.
Also, taking the automaker’s low- or zero-percent financing often means having to pass on a rebate, since your choice generally is one or the other, not both. But you often can get the best of both worlds by taking the rebate from the dealer and getting financing elsewhere, even if the interest rate is higher than the promotional one from the manufacturer.
To use the loan-versus-rebate tool, you’ll first need to shop for the best alternative rate.
Bad Credit Auto Loans & Financing for New and Used Cars
Get approved for your car loan today and shop for your car like a cash buyer!
Benefits of Car Loan Nerd:
- It’s free to apply. No obligation.
- Affordable & flexible loan options.
- Low payments to fit any budget.
- Qualify with bad credit or no credit.
Here are top rated places to look:
Choice-carloans.com Choice Car Loans are in constant, daily contact with all of their loan partners. If there is a partner that shows a history of providing true value to their customers then they grow their business with them. Partners that don’t provide that value to their customers simply get unplugged from their service. That personal relationship means that you are being taken care of by a loan partner that is focused on giving value to you. Choice-carloans.com believe that this is the only way to do business.
- We don’t let past credit problems get in the way.
- Bad credit, no credit & bankruptcy OK.
- 1,000+ lenders and dealers available to assist you.
- Loan amounts up to $30,000 with same day approvals.
- No money down options available.
- $1,800/month income qualifies.
Web2-carz.com Help you reach hundreds of lenders and dealerships with One Application!
Web2carz will match your car loan with their massive network of lenders and dealerships, finding you the best available auto loan right now.
You can improve your loan acceptance with a down payment. Their lenders and dealers look at something called the loan to value ratio, which is the loan amount compared to the value of your car. In simple terms, the bigger your down payment, the better your chance of getting approved.
- Get matched with a lender or dealer
- Choose your car
- Hit the road in your new car