We’ve all wondered if that auto loan deal we were getting was really as good as they said. Many of us may have felt pressured when shopping at a dealership to just take their auto loan offer because they assured us it was a good deal. With some advance planning and research, you can be sure your next auto loan is a good auto loan.
Seven tips for shopping for auto loans
1. Calculate how much of a vehicle payment you can afford
Buying a vehicle and getting an auto loan without knowing if you can really afford it can be a huge financial mistake. One you don’t want to make. Your budget should determine the price range of your new vehicle. This, in turn, will determine the amount you borrow and your monthly loan payment.
2. Take the wheel and do some online research
As with purchasing just about anything, a little advance online research goes a long way. There’s a wealth of information out there on every type of vehicle. This includes price; as well as deals that can bring down the price of the vehicle. Automaker deals, cash back offers, and other incentives may impact the amount you need to borrow. You will also need to research other costs involved, such as insurance, maintenance, and fees. You’ll want the vehicles you choose to test drive to be within your auto loan range.
3. Know your credit score
Your credit score will help to determine the auto loan rate you qualify for. Credit scores range from 300 to 850. A score of 700 or above is generally considered good. Knowing your credit score will help you determine the rate you qualify for on you new auto loan. You can always check your credit score for free at Annual Credit Report.com.
4. Start shopping for auto loans
You can easily begin your auto loan search online. Your first stop in your quest for the best auto loan should not be the dealership, but rather a local credit union, such as Benchmark Federal Credit Union. You should always explore all of your car loan options and shop a few lenders for comparison.
5. More than rates matter when shopping for an auto loan
Of course, rates are important, but when shopping different car loans, be sure to compare more than just rates. There are several other things to consider. First of all, what are your term options, and how will they impact your rate and your monthly payment? Can you afford a shorter term to secure a lower rate and pay off your loan faster? If not, how will that longer term affect your rate and total interest? What percentage of financing is available? For instance, some auto loan lenders may require a down payment and finance a lower portion of the vehicle price, while others may provide financing over 100% of the value. This can have a big impact on your decision if you are cash strapped and can’t come up with a down payment. Finally, what are all of the costs and fees involved in the loan and are there any early prepayment penalties? Be sure to get an answer to all of these items before making your decision.
6. Consider the total cost of the auto loan
This will include all of those costs and fees you asked about; as well as the total interest you will be paying over the life of the loan. This is a great way to accurately compare your offers from various auto loan lenders. Is your rate fixed or adjustable? Although most auto loan rates are not adjustable, it may be hard to calculate a precise cost of an adjustable auto loan; unless the lender adjusts the term; instead of the monthly payment when the rate adjusts.
7. Get pre-approved for an auto loan
Smart vehicle shoppers get pre-approved for auto loans before visiting a dealership. Once you’ve settled on a lender and believe you’ve determined a price range you can afford, by all means, get pre-approved. Be sure you know all the terms associated with the auto loan and get the pre-approval in writing. Why is an auto loan pre-approval so important? At the end of the day, your pre-approval will give you that little extra bargaining power you need to negotiate a better price with a dealer.
Now you’re ready to buy a vehicle
To sum it up, shopping for an auto loan is just as important as shopping for the vehicle itself. Just like you shouldn’t visit just one auto dealership, you shouldn’t take the first auto loan offer that comes along. Do your homework and make sure the auto loan you choose is the right loan for you. Start your vehicle loan search at Benchmark Federal Credit Union, where you will find competitive auto loan rates, up to 125% financing* for qualified borrowers, and free pre-approval. Make it your benchmark for auto loan comparison!
Read more about auto loans in our blog “Avoid These 4 Auto Loan Mistakes.”
*subject to change.