5 Benefits of Price Shopping for Your Auto Loan

Most people wouldn’t dream of buying a car without doing some price comparison shopping but few are as diligent when it comes to financing. Your auto loan can cost you thousands of dollars and it deserves the same attention. Doing some price shopping to see what deals you can get on your loan is a crucial part of buying a vehicle.

It’s important to know how much car you can afford. Unless you’re buying a car with your savings, budgeting for only the car purchase price will get you into trouble. You need to include the cost of borrowing along with the cost of the vehicle to see what the true cost of your purchase really is.

Auto loans can vary substantially in features and price. Buyers need to be diligent and do comparison price shopping before signing anything. Not convinced? Here are five reasons why shopping around is the way to go.

1. Determine Your Credit Score

Your credit score will determine what interest rate you qualify for. The three credit reporting agencies are Equifax, Experian and TransUnion. Your credit score is a rating between 300 and 850 that is based on your credit report with these agencies.

Applying for a pre-approved auto loan at a financial institution, such as a bank, is a great way to find out the state of your credit. They will pull your credit reports and determine a fair interest rate for your auto loan. The rate your bank gives you is a good baseline to go by while you’re price shopping.

Understanding your credit score and what rate banks are willing to give you will let you know when you’re getting a good deal and alert you to bad ones. Consider it the average market price. If you can find a better deal, then jump on it. If not, you’ll know you can always fall back on what the bank offered.

2. Find The Terms That Fit

The auto loan term is the amount of time you have to pay back your loan. When you’re price shopping for your loan, consider what you need and how much you can afford. It’s important to choose the right auto loan terms that fit your life.

A long term loan means more time to repay what you owe. This translates to lower monthly payments spread out over the course of more months. The downside to long term loans is that you pay a higher interest rate.

Short terms on a loan mean you will be done paying it off earlier. Your interest rate will be lower which means you will owe less overall. However short term loans mean higher monthly payments.

3. Keep More Money

Price shopping for your auto loan can mean keeping hundreds if not thousands of dollars in your pocket. Car loans are not created equal and there are various components that affect how much money a loan will cost you over the life of the loan. Shopping around and comparing what you’re being offered can help you hold on to your money.

The interest you are charged gets added to the amount you are borrowing. A higher rate means that much more money you have to pay back and that many more dollars you will be parting with. It can make quite a difference so it’s worth shopping around.

The term of your loan will have a bearing on how much money you will have to hand over too. How long it takes to repay the loan has a direct affect on how much interest you will have to pay. A shorter term means more money that you get to keep.

4. Consider The Cost Of The Middleman

If you’re in the market for an auto loan the worst thing you can do is not look past what the dealership is offering. It’s a good idea to ask what the dealership can give you while you’re there but if you stop at that point you may often end up paying too much. See what else is out there before you settle.

When it comes to auto financing, a car dealer is a middle man. Middle men get a cut for their service and in most cases it’s the customer who ends up covering that cost. If the dealer ends up offering you the best price then take it, but do some price shopping and make sure it really is the best deal you can get.

5. Never Stop Shopping Around

Even if you already have an auto loan, that doesn’t mean you can’t do a bit of price shopping from time to time. Most people know that they can refinance the mortgage on a home but not many people consider doing the same with their car loan. It’s a good idea to see what’s out there and compare with what you already have.

If interest rates are lower now than they were when you first signed up, refinancing makes a lot of sense. Refinancing your car loan at a better interest rate can lower your monthly payments, allow you to pay your loan off sooner, and save you money. Just because you have an auto loan already doesn’t mean you can’t get a better one.

Another time to consider refinancing is if your situation has changed. Maybe your credit rating has improved making you eligible for a lower rate. Or perhaps you have some savings that you can put down on your loan allowing you to refinance and borrow less money. It never hurts to look around.

When you’re price shopping for your auto loan there are three stops you just can’t skip. Check with your bank to get your credit score and a baseline of what rates you are eligible for. See what the dealership is offering to find out if you are eligible to receive a good discount. Use myAutoloan and get up to four additional offers in minutes with no obligation to sign. With these sources you should be in a good position to make a great choice on your next auto loan.