For many people, purchasing a car requires obtaining a loan. Fortunately, today's low interest rates have made financing less costly than ever before. Before signing any sort of financing agreement, car buyers should take a few simple steps that will help them to minimize borrowing costs.
Shop Around for Rates
Before accepting any financing offer, shop around for competitive interest rates. Assuming that the dealer offer is your only option can significantly inflate your borrowing costs. When you do research about interest rates before you discuss financing with the dealer, you have the information that you need to know whether or not the dealer is providing you with a fair quote.
Negotiate with the Dealer
If you've shopped around for rates, then you may be able to negotiate with your dealer for better financing. For instance, if you approach your dealer with an offer from another lender, then your dealer may be willing to beat or match that offer. Again, taking the time to do research will enable you to save money on financing.
Choose the Shortest Term Possible
Interest rates are lowest when you choose the shortest financing term that you can afford. While payments are lowest for 60-month payment plans, the overall costs for the loan are significantly higher. If you can make room in your budget for slightly higher monthly payments, then you will end up saving a chunk of money over the long term. In addition, you'll have your car paid off before the value of the car depreciates below the balance of your loan.
Improve Your Credit Score
Before you purchase your car, take the time to look at your credit report. You can improve your credit score by paying down consumer debt, such as credit card balances, and making sure that all of your payments are made on time. In addition, you can dispute any false items that may be negatively influencing your score. Good credit scores earn better interest rates because lenders view people with good credit as less of a risk.
Choose a Trusted Provider
Banks or credit unions provide trustworthy auto loans for their customers. However, many people are turning to online lenders because they offer lower costs. Reading online reviews of loan providers will help you to determine whether or not they are trustworthy and legitimate. You may also check their rating with consumer organizations like the Better Business Bureau.