Home Auto Your Guide to Saving on an Auto Loan Your Guide To Saving On An Auto Loan Buying a new car can seem like a big investment, but on the contrary, it is anything but that! While it is a big expense, a car shouldn’t be counted as an investment because its value depreciates very quickly. That reason alone is enough for you to not stretch out your loan for too long or pay too much interest. Here are 5 ways for you to save on your next auto loan:
Understand Your Credit Score
The first thing you must do before even thinking of taking out a car loan is check your credit score. Unlike credit cards and mortgages, car loans are given out even to people who don’t hold a great credit score. The only difference is that if you have a bad credit score, you end up paying a lot more. Dealerships offer very attractive rates (2.9%, 1.9% or even 0%) to people with excellent credit- 750 or more. But if your credit score is lower than 650, you can only get loans with rates of 10% or more.
Shop Around if You Don’t Have Great Credit
If you have excellent credit, chances are you will be able to secure great rates with dealerships. But if you’re on the other end of the credit spectrum, you should try your luck with various lenders to get the best deal possible. Try online lenders, local banks, credit unions and more for competitive interest rates.
Keep the Loan Term as Short as Possible
While shorter loan terms mean higher monthly payments, they also mean lower interest rates. Many times, banks end up charging higher interest rates for loans with longer terms, increasing the cost of your credit.
Put Down 20% Payment Upfront
Even though this may seem like a no-brainer, dealerships don’t always ask the buyer to put down a payment. Putting down 20% of the car’s total value helps bring down your total cost, in turn reducing your monthly premiums, your loan term AND your interest payments.
Pay for Extra Expenses Like Taxes, Fees, and Others with Cash
Dealers are more than happy to add miscellaneous expenses like sales tax, documentation fees, registration fees,and others to your loan amount. Try to avoid letting that happen by paying these upfront in cash. This will help keep your loan amount from increasing.
