Most people don’t have enough cash to pay for a car in full at the time of purchase. This means that they need to take out some type of car loan to cover the rest of the purchase price. Interest rates on Car Loans can vary by quite a bit, but taking a few things into consideration can help you get the best possible rate for your purchase.
Shop Around for Best Loan Rate
Before even bothering to find the perfect car, it may pay to search for the best rates for Car Loans in your area. Do this all within a 2 week period, however, or it may actually cause dings in your credit score. Once you have the best local rate, then it’s time to start shopping for a car. Don’t rely on the dealership for the best rate, but do note the rate you have found already when purchasing the car, as the dealership may be able to match it or offer a better rate to sweeten the deal when making the sale. Check with online banks, local banks and credit unions before checking with the car dealership.
Consider the Cost of the Loan, Not Individual Payments
Although some companies may be willing to extend the term of the loan to make the individual payments lower, this will mean paying more over the long run. It’s better to figure out how much the car will cost in full with the loan when comparing loans, rather than worrying about monthly payments. Also, take into account any potential rebates that the dealer may be offering in lieu of a lower interest rate. In some cases, the cash rebates may make for a better deal even with a higher interest rate.
Go Over Entire Contract
Make sure that the math is right, and check for any details in the fine print that may not be favourable, such as a variable interest rate and prepayment penalties. Also, make sure that anything that was agreed upon verbally is also in writing, otherwise it won’t be binding.
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