5 Tips on How to Get a Car at Low Interest Rates

Posted Thursday, Dec 15, 2022

Purchasing a car isn’t something that comes around every day. In fact, it is a once-in-a-decade transaction, assuming you get a great car that lasts you a long time. Since you spend considerable time with the car, you must buy one worth your money.

Unfortunately, interest rates can cause car financing to get expensive and become a headache. Low-interest rates can be achieved through a better credit score, the kind of car you purchase, and how you get your loan.

Getting a loan for buying a car is much easier if you have a good credit history, as that could lead to a pre-approval. Pre-approvals can potentially decrease the interest rate you need to pay as both your dealer and lender accommodate your requests.

How You Can Get Low Interest on a Car

Plan Your Finances

When buying your first car, you may have the instinct to spend much more than you can afford. You must plan your finances and remember that a car is not your only expense. You have your monthly groceries, daily requirements, utilities, and a mortgage if you have recently purchased a house.

When contacting or visiting a car dealership, have an estimated budget in mind, and don’t overstep. You can draft this after subtracting the necessities from your salary or dedicating a percentage to monthly car expenses.

Don’t rely on the dealer’s final quotes to make your decision. Remember that you have multiple options, so it is best to explore other dealers and search the internet to analyze the quote and dealer’s reliability.

Choose Your Car

You can get low-interest rates if you rightly decide between different models or car types. More expensive quality cars may require you to pay a higher interest rate. Similarly, sports cars or rarer models can also follow the same trajectory.

Another factor to think of is whether you want brand new or used vehicle. You can get a used car for cheaper. However, the interest rate might be higher. On the other hand, brand-new cars have low-interest rates.

Consider your usage and requirements and plan for the car accordingly. If you don’t think you can afford a brand-new car, perhaps it is best to go for a pre-owned vehicle. It is easy to verify the reliability and potential performance of used cars through their history and further inspection. Moreover, you can purchase a certified pre-owned car if you need the added assurance.

Consider a Different Lender

If the lender you are considering doesn’t offer low-interest loans, consider a different lender. Car financing can be done through different sources, including banks, credit unions, or manufacturers. You have many options!

Consider contacting a dealer who offers you multiple routes. The best dealer can connect you with different car financing options for quality cars that don’t demand high-interest payments. The dealer may take a cut, but their expertise can lead you to lower interest rates.

A car dealer can understand your requirements and budget to connect you to the financing option that meets your expectations. Dealers also have access to special interest rates, which they use to provide you with better options. However, conducting your research can help you meet the best fit.

Pull Out the Calculator

If you are looking for quality cars, it is time you pull out that calculator and crunch some numbers. An interest rate isn’t the only thing that can increase your cost. How much you pay upfront versus how long your loan term is can quickly add up.

Consider paying as much as you can with your down payment, as that can decrease your cost in the longer run. You will have to pay the same interest rate, but it will be on a lower amount, decreasing the payment.

Calculate your total interest, monthly payments, and overall cost in multiple down payment scenarios before you agree to anything. The longer your loan term, the more interest you will have to pay in the long run. If you are looking for low-interest rates, pick a shorter term.

Work on Your Credit History

If you can, improve your credit history before you take the leap and get that auto loan. Car financing can be a lot easier if you have a good credit history. Lenders will evaluate your credit score, and the higher your credit score, the easier it is to qualify for low-interest rates.

You need a good credit score to get approved anyway, so why not work on achieving the best credit score that can help you get one step closer to quality cars? You can monitor your credit history by receiving an annual report or accessing it online.

Keep a close eye on your score and get it to the optimal level before applying for an auto loan. You can note any discrepancies or things you disagree with and file the relevant disputes to get them straightened out.

You can also take care of all due payments and debts you haven’t paid. This will help considerably better your score and allow you to get a better rate for your car loan. Moreover, consider keeping other loan applications on hold to avoid hard inquiries.

Final Thoughts

Car loans can be some of the most expensive loans to get. It is essential that you put in the hours required to get yourself the best deal. Keep in mind that issues with interest rates can pile up your payments down the line.

The more delays in payment, the more your credit score suffers. Try to set a term and payment that you can keep up with and don’t go beyond your budget. Moreover, you must trust the best dealers to get you the most efficient rates.

Conduct your research and match it to your dealer’s reviews and rates. If everything ticks off, you can start searching with them to get the best interest rates for your auto loan.