How to Get the Best Auto Loan Rates in 8 Steps
Have you ever had an auto loan quote in hand before shopping for a car instead of getting one from the dealer?
Some lenders may actually give you a better rate if you get preapproved for an auto loan ahead of time. Just a fun tip!
Shopping for a car is fun but there are always extra steps to do that many skip over before heading to the dealership.
This is the way to go if you’re looking to get the best auto loan rates possible!
1. Take a look at your credit score
2. Shop around for better rates
3. Start the pre-approval process
4. Know your budget
5. Car shopping time!
6. Listen to your dealers rates
7. Loan finalizing process
8. Monthly payments
So, let’s start:
Take a look at your credit score
As we all know, your credit score is the ultimate deciding factor to determine how much you qualify to borrow.
First things first, check your credit report. Make sure there is no wrong information, for instance, fraudulent activity because that can be the reason for a denied auto loan or simply an interest rate that is out of this world.
Any errors or misinformation that may be on your credit report is suggested to get fixed and taken care of before applying for an auto loan.
If you’re worried about checking your credit report because it may “lower your score”, keep in mind that you are permitted a free copy of your report every 12 months from Equifax, Experian, and TransUnion. Your bank or other online institutions may offer free credit scores as well.
Looking at a 600-credit score or lower? Maybe consider pushing off the car shopping for another six months or so. It may seem like a long time but by paying your monthly bills on time along with lowering your credit card balances, it can help boost your credit quite a bit, so you can qualify for a more affordable loan.
Shop around for an auto loan
We’ve gotten the hard part out of the way – credit situation.
Now it’s time to check out some auto loans and lenders.
It can come from many different banks or institutions:
- Large national banks
- Your local community banks
- Online auto loan lenders
- Dealership lenders
Comparing quotes is not difficult and can save you quite a bit over time. Starting with national and local banks along with online lenders is a good start to have an idea, even if you’re planning to take the dealerships offer.
Being a bank customer can have its perks, they may give you a preferred customer rate. Even comparing auto loan rates online is quick and easy.
Start the pre-approval process
After narrowing down your options to a couple lenders, now you can apply and compare your offers. It is the best when the lenders compete for your business because that ensures that you’re getting the best auto loan rate possible.
Pre-qualification will give you an idea of the rate you’ll receive but getting pre-approved gives you a set rate and loan limit for more security at the dealership.
Applying for pre-approval on an auto loan should be done within 14 days to reduce the credit score impact it might have. They will ask for personal information including your social security number.
Did you know that having multiple hard credit inquiries within a short period of time counts as just one? Well, if you didn’t – now you do.
You’ll need to provide some personal details to lenders, including your Social Security number, for preapproval. It’s important to apply to all preapproval lenders you’re considering within 14 days because multiple hard credit inquiries within a short time count as just one.
Know your budget
Once you receive your pre-approval offer, it will clearly state the maximum amount you can borrow from the lender. If you need assistance managing how much you will need to put down along with your lending terms to see what your monthly payment will be, use an auto loan calculator.
After putting it all together and finding out that your monthly payment may be a little out of reach just remember that your pre-approval offer is just a limit, meaning you don’t have to borrow the full amount.
Car shopping time!
This is the best part. The excitement of opening the door to a dealership and looking around the showroom to picture what car you can see yourself in is the highlight of this tedious process.
Listen to your dealers rates
Once you’ve picked out your dream car that meets your needs, you’re ready to roll out of there!
You have your pre-approval offer in hand, why not see if the dealer can beat it?
When the finance manager sees your set interest rate for your auto loan, they will do anything they can to beat it because all banks and financial institutions fight for business.
Loan finalization process
Best case scenario the dealership matches all terms and beats the pre-approval rate.
If the dealership beats your pre-approved interest rate (and the other terms are the same), congratulations — you can rest assured you got a great financing rate. You can take that loan and disregard your other offers. Just be sure to read the contract before signing, to confirm there’s nothing out of the ordinary:
- Hidden fees
- Check the loan term
- Early payoff penalty
Ahh! All done.
You may receive a book from the dealer of coupons to tear out for each month for the life of the loan. Or you can ask to receive a login for their web portal, you can manage your personal information and payments on your own without mailing a check.