Shopping for an Auto Loan: What You Should Know
If you get nervous when shopping for a car or auto loan, you’re not alone. Many people want to get the best deal when purchasing a vehicle, but don’t know how to negotiate or get rates they preffer with auto loans. Learn everything you need to know about shopping for auto loans so you can buy your next car with confidence.
Tips for Finding An Auto Loan
As with shopping for any type of loan, finding an auto loan will be a lot easier if you have some guidelines to follow. Here are some basic steps you should never skip.
Budget Before You Shop for Loans
Before you shop for a new car, figure out what you can afford to pay up front and what you can pay monthly in loans. When you know what you can afford, you won’t get carried away with upgrades, or fall in love with a car you can’t afford.
If you’re planning ahead, it’s worthwhile to check your credit score. This way, you can improve your credit score and clear any errors off your report, and get the best available loan terms. The best rates are for those with excellent credit (700 or better), so the lower your credit score, the more important it is to shop for loans. Doing so maximizes the likelihood of obtaining.
More favorable loan rates and terms than you would otherwise get if you were to simply go with the first lender who approved your loan.
Explore Auto Loan Choices
While your dealer can present you with an auto loan, they aren’t the only choice. Your local bank or credit union also provides auto loan options, and there are a number of online lenders that facilitate vehicle financing as well. Compare auto loan lenders online with lenders near you.
With auto loans, you’ll want to pay the lowest amount of interest possible. This is desirable with all major purchases but it’s critical with cars, which depreciate faster than other assets. If the interest you pay on an auto loan is high, you could find yourself being “upside down” on your loan i.e. owe more than the car is actually worth. If something happens and you need to make a change in your life, being upside down on your loan may inhibit your ability to trade-in, refinance, or sell the car.
Taking the time to compare offers can net you a lower interest rate, saving you hundreds if not thousands over the lifetime of your auto loan. You can shop for a loan right here, on Loanry. We work only with reputable lenders, so you can look at what they offer and see if they would make you an offer depending on your situation:
What You Need to Know About Auto Loan Discrimination
Lenders are not allowed to discriminate by sex, marital status, race, or religion. By law, lenders can ask about your immigration status, but not about your nation of origin. So it’s acceptable for a lender to ask if you are a legal immigrant, but it’s not okay for them to ask if you’re from Egypt, for instance.
Lenders might ask you about child support, alimony, or other spousal support programs. You have discretion about whether to answer, which a lender must inform you when they ask. If you have a court agreement and expect to receive alimony for 15 years, it could be worth it to disclose on a 10-year auto loan. The alimony income makes your gross income appear larger, so a lender can extend more favorable terms. If you don’t want to answer these questions and a lender presses you, it’s discrimination.
If you think you’ve been discriminated against when shopping for auto loans, submit a complaint to the Consumer Financial Protection Bureau.
Negotiating Auto Loans
Loan offers are a starting point. Smart shoppers negotiate the terms of their loan. You can negotiate the interest rate, the pre-penalty payment (where you’re penalized for making extra payments), loan origination fees, and the overall length of the loan. It might be worth it to shorten the loan period and pay more every month, since you’ll own your car outright sooner. You may negotiate warranties or upgrades. If you’re trading in your car, you can negotiate the trade-in value against the new car cost.
Your state sets registration fees and taxes, so these aren’t negotiable.
The best way to get a better rate on your auto loan is to ask for it. Lenders will not offer you the best loan terms by themselves. Comparison shopping loan offers, and asking for a better deal, will help you save money.
Liya is a financial educator with a background in SEO focused content writing. She has been doing copy writing and blog creation for finance companies for over 5 years.