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How To Get The Best Rate On Your Car Loan

Taking out a loan for a new car can seem like a daunting task. You’re probably wondering how to find the best rate so that you can purchase the car of your dreams knowing you will be able to pay it off comfortably and over a set period of time. Today we’ll outline 5 steps you can take to ensure you get the best rate on your car loan.

  1. Compare rates between dealers and financing providers

It’s easy to say yes to the finance rate the dealer has to offer. After all, this is probably the quickest option! However, it pays to do your research to seeif you can get a better finance rate with a different provider. How can you be prepared for this interaction? The answer is simple. Do your research on the car you want and go to the dealer with a car loan already arranged. This gives you more room to negotiate the price of the actual car with the dealer.

  1. Calculate the total difference in cost between different rates

This is where the numbers come in. You may have varying deals from different dealers or financing providers. For example, one rate might include an extended warranty for any type of work that the car may need for the first 5 years. It pay to calculate the overall difference in cost between that rate and a lower one, to accurately determine whether the extended warranty is worth it. It then comes down to how much you value the peace of mind of having an extended warranty. Once you calculate the total difference in costs when it comes to the vehicle, policies, and loans, you can make the best financial decision for your needs and budget.

  1. Improve your credit score

You’ve surely heard this one before. Your credit score is an integral part of any loan process, especially when purchasing a car. If your credit isn’t the best, you may feel like there is no way that you will ever get approved on a loan for a new car. However, there are a few things that you can do to help boost your credit to make your dream car become a reality.

The easiest way to boost your credit score is to pay off any outstanding debts. Additionally, you can look for errors in your credit report. Unfortunately, many credit reports have errors that go unnoticed simply because individuals never investigates the situation. Be an advocate for yourself and have any errors in your credit corrected! You can also ask for “goodwill adjustment” if you only have a couple of late payments. You may be surprised how your provider will work with you to erase these late payments if you have had a better record of paying on time recently or the late payments were not frequent. Lastly, you’ll want to consciously think about your credit during the car buying process. This means avoiding hefty credit card charges, not applying for additional credit cards, and paying your bills on time.

  1. Seriously consider a fixed rate

A fixed rate is not appealing to some people because they want to believe that they stand a chance at getting a better deal during some point of the repayment process. However, when you opt for a variable rate, you give up a degree of control and have no way of knowing what you will be paying each month. This is not only slightly risky but can make it difficult to budget your money. When you opt for a fixed rate, you’ll know how much you owe every month. You then may be able to negotiate a rate with a dealer, or work with a financing provided who can negotiate a rate for you,that would be lower than the overall average of a variable rate.

  1. Shorten your loan term

By opting for a loan with shorter terms, for example 2 instead of 3 years, you can reduce your overall costs. Crunch the numbers and determine how much you can afford to repay every week, knowing that a shorter loan term generally will means lower total repayments. In addition, if your loan includes monthly fees, shortening your repayment terms will reducing the total cost of these ongoing fees.

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