5 Tips to Get the Best Deal on a Car Loan
By Evie Harrison
Last Updated: 04/01/2020
Summary: If you are willing to spend a little bit of time comparing and compromising auto opportunities, than you should be able to get the best deal on your next car loan.
The automobile industry is one of the few industries that continues to thrive year after year. According to Statista, 75 million cars were sold around the world in 2019. Volkswagen alone witnessed revenue of around 278 billion USD!
Some might wonder, what makes the automobile sector such a profitable one.
Well, there is much more attached to buying a car than what often meets the eye.
Getting your own car is often thought to be a great accomplishment. After all, in today’s world, a car is more than just a mode of transport. Instead, it is a status symbol. It marks a person’s transition into adulthood.
While everyone wishes to purchase their own car as soon as possible, it is seldom achievable early on. This is because vehicles tend to be quite expensive. Does this mean that you need to bid your dream of owning your own vehicle goodbye? The good news is that you don’t have to.
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You can easily seek car loans to purchase a car. Currently, it is quite lucrative to do so. As per Statista, interest rates on car loans in the US now stands at 4.56 percent. Compared to 2018, this is significantly lower!
If you are thinking of getting a car loan, here are some tips that will help you seal the best deal.
1. Compare and Choose the Best Dealership
In the long term, the lesser your loan amount is, the better. Hence, it is essential that you select the right vehicle at the right dealership.
Dealerships are now a great platform to purchase cars because, due to increasing competition, they now offer competitive rates. For instance, if you reside in the UK, you can go for car dealers like Redline Specialist Cars to get the car of your choice that is actually affordable too.
This was not the case before. As per the Wall Street Journal, in 2009, dealers used to take home over 4.7 percent of the selling price of a new car. As of 2017, the value stands at 2.5 percent.
You can directly visit a dealer or seek options that are available online. Regardless of which platform you use, the fact remains that you must strive to get the best and the most affordable deal.
Try to negotiate and agree on the lowest price possible. The lower the amount is, the higher is the chance of you getting the car loan.
2. Consider Getting a Used Vehicle
According to the Federal Reserve Bank of the US, Americans received over 560 billion USD worth of car loans in 2017 alone. And 4.1 percent of those accounts were considered delinquents over 90 days.
The last thing you would want is to be late when paying your car loan installments.
Well, this negatively impacts your credit score and therefore makes it harder for you to get other personal loans later on.
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One way to ensure that you don’t miss your payments is to seek a plan that is affordable to you. Generally, this is much more possible with used cars than it is with new cars.
According to data collected by Finder, the average loan for a new vehicle in 2017 was 3,099 dollars, which required a monthly payment of 515 dollars. Compared to this, the used car loan amount was 21,375 dollars, with an average payment of 398 dollars.
Depending on your financial status, decide whether it is better to purchase a new vehicle, or get a used one. If it is your first car, we would suggest you get a used one. Again, since the loan amount will be low, you are likely to get a better deal on your car loan.
3. See Your Credit Reports
Depending on where you live, get your hands on the credit reports published by the major credit reporting agencies in your country.
It is essential to get and see all the credit reports because you can never be sure which one of them a given lender will consider when giving you a loan. Check your reports thoroughly, and in case of any mistake, straighten it out before you go to get an auto loan.
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Also, make sure you have a respectable credit score before seeking an auto loan. Remember, anytime a lender makes a hard query regarding your credit report, your score decreases.
In case your rating is already ineligible for a loan, knowing it will allow you to prevent further decreases.
Know where you stand before approaching a lender for a car loan.
4. Shop Around to Get the Best Auto Loan Rate
Just like you first did your research to get the best deal on your desired vehicle, redo the same thorough process. But, this time, with your auto loan lender!
As per Nonprofit Center for Responsible Lending, 80 percent of the time, car buyers finance their vehicles from the dealerships they are purchasing from. Many do so because of the attractive advertisements placed by the dealers.
Before sealing the deal on such car financing options, explore other possibilities as well. Know that various banks also offer auto loans. You can also choose an independent lender. Understand the pros and cons of every option.
Whether you are getting a loan from the dealership itself or a bank, compare the rates each offer you. Select the one which offers you the lowest interest rates or the most flexible and convenient payment plans. Which of the two you value more depends on your financial standing.
5. Try to Choose the Shortest Loan
Generally, you might be tempted to select extended payment plans. This is because such plans tend to have a lower monthly payment.
But, what you are not considering is that longer payment plans cost you more. This is because you are paying more interest. Unless you cannot afford to choose short loans with high monthly payments, it is always smart to select the shortest loans possible.
See the bigger picture. Strive to reduce your total cost by getting a car loan that ends after two years.
With these five tips, you can go on the path to get the best deal on a car loan and purchase the vehicle you have always dreamed of driving!
We would like to know your opinion in this regard. Do share your views in the comments section!
Evie Harrison is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter:@iamevieharrison
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