| Best Auto Loan Rate |
| By Credit Federal |
Published
09/4/2008
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Auto Loan
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How to get the best auto loan rate
Auto loans consists of two main elements: The principal (amount borrowed) and the interest rate. There may be other factors; too, such as fees.
Auto loan interest rates are affected by either the prime rate or yields on Treasury securities. Over the last 7 to 8 years, the average new auto loan interest rate has been around 7 to 9%. Right now, interest rates are at the lowest they've been in many years.
Auto lenders; like other creditors, evaluate risk to determine individual interest rates. Hence, bad credit people who are considered a high risk won't qualify for the lowest interest rates. They also use the vehicle's value to determine risk. The lower the value is to the loan amount borrowed, the higher the risk. For that reason, used car interest rates; as well as refinancing rates, run higher than new car rates because the equity value is lower.
How to get the best auto loan rate and deal:
1) Take advantage of your right to get a free credit report copy from each of the three major credit bureaus, TransUnion, Equifax and Experian. Look for and fix errors that may be lowering your score, because the lower the score the higher interest rate you'll pay, which equates to higher monthly payments and more money wasted in interest over the long term. And, if you wanted to sell or trade-in the auto, you may end up owing more than the auto is worth. This is called being 'Top Heavy'.
2) Consult car buying guides and web sites to get a value estimation of the vehicle you're interested in buying ever before you step onto a car dealership.
3) Compare auto loan quotes from several lenders, not just the often higher interest financing of a dealership. Bad credit? Some lenders will finance bad credit people, but you can expect to pay a higher interest rate. If you have a bad credit score, ask for a loan quote from your bank and/or credit union because they may be able to offer you a competitive rate. Some credit unions will take time to look over your credit report to see if; perhaps, your bad credit rating was due to a temporary problem (such as illness or divorce) which has been resolved.
4) Consider online auto loan financing that will give you a check in hand to take to a dealership. Having a check ready can be great bargaining leverage to get the best deal from a dealership.
5) Haggle. Along with the credit crisis and poor economy, car dealerships are hungry for sales. On top of special financing offers such as 0 interest and cashback rebates (which you'll need to have better than fair credit to qualify), also haggle the cost.
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