7 Tips for Getting the Best Car Loan Rate

The cost of borrowing can be deceiving and auto financing often costs thousands of dollars. That little interest rate may seem like such a small number but really adds up over time. With careful consideration and planning, you can secure an auto loan that fits your budget and financial goals.

When looking for an auto loan, there are several strategies to keep in mind to help you get the best car loan rate possible. It's important to do your research, shop around for the best rates, negotiate with lenders, and consider factors beyond just the interest rate. By being aware of the true cost of borrowing and following these tips, you can save yourself a significant amount of money in the long run.

1. Check Your Credit Score

Check your credit score and make sure it's in good shape. This number demonstrates to lenders what kind of borrower you are and how much risk the loan represents. Your credit score can have a huge impact on your eligibility for a lower interest rate.

A higher credit score will typically lead to a lower interest rate. For example, if someone has a credit score of 700 or above, they may qualify for a 3% interest rate on their car loan. However, if their credit score is below 600, they may only qualify for a 7% interest rate.

2. Shop Around

Shop around and compare rates from different lenders to ensure you get the best car loan rate possible. Don't just settle for the first offer you receive. You should obtain quotes from at least three different lenders to determine which one offers the best interest rate and terms.

It's important to shop around and compare rates from multiple lenders. myAutoloan can make comparison shopping quick, easy, and convenient. Shopping around can save you thousands of dollars over the life of the loan.

3. Consider The Loan Term

The loan term is the amount of time that you have to pay back what you borrowed. It's important to consider the length of the loan. While a longer loan term may result in lower monthly payments, it can also mean paying more in interest over time.

Extending your term too much can put you in a situation where you have negative equity in your vehicle. This means that you end up owing more than the car is worth and this could be a big problem if something were to happen to the vehicle. Be sure to weigh the pros and cons of different loan terms and how they fit your financial situation before making a decision.

4. Save For A Larger Down Payment

One way to avoid having negative equity in your new car is to have a larger down payment. It may be difficult to save a sizable sum but this really is a great way to ensure that you get the best car loan rate that you can. A larger down payment can lower the interest rate and reduce the total amount you'll need to borrow.

However, in some cases, such as with zero percent financing offers, putting more money down may not actually reduce the interest rate. Additionally, if putting down a larger down payment depletes your savings, you may be at risk of financial hardship in the event of an emergency. It’s important to look at your specific circumstances to determine what is best for you.

5. Look Out For Hidden Fees

Be mindful of any additional fees or charges that could add to the overall cost of the loan. For example, some auto loans may come with prepayment penalties if you pay off the loan early. This can negate any savings you may have gained from a lower interest rate.

Another thing to watch out for are origination fees that some lenders charge just to process your loan application. Origination fees can add up to hundreds or even thousands of dollars increasing the total cost of the loan. Be sure to read all the fine print and find out the total cost of borrowing to get the best car loan rate.

6. Negotiate the Terms

Don't be afraid to negotiate the terms of the loan with the lender. Ask for a lower interest rate or to have certain fees waived. Remember, it's important to be confident and assertive when negotiating with lenders. By taking the time to speak up, you could potentially save yourself thousands of dollars in interest payments over the life of the loan.

If you’re not getting anywhere don’t be afraid to walk away and look elsewhere. You may be able to find a better rate by looking at multiple lenders and negotiating with them. Don't settle for the first offer you receive, and always do your research beforehand to ensure that you get the best car loan rate possible.

7. Get A Cosigner

If you have a lower credit score, consider asking someone with a higher credit score to cosign on the loan. This person enters into the loan agreement with you and shares the responsibility. Having a co-signer can help you secure a better interest rate.

It's important to note that if you default on the loan, the co-signer becomes responsible for paying back the entire amount. This can strain relationships and cause financial hardship for both parties involved. It's important to thoroughly discuss and consider all potential risks before entering into a co-signing agreement.

Auto financing can be expensive, and it's crucial to consider several factors when looking to get the best car loan rate. Check your credit score to determine your eligibility for a lower interest rate, make a larger down payment, adjust the loan term, and shop around to compare rates from multiple lenders. Negotiate with the lender and look out for hidden fees. Asking a co-signer with a higher credit score for help can secure a better interest rate.