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Auto Loan Tips >>
Tips to Help Consumers Get a Smart Deal on an Auto Loan
Check credit report for accuracy.
Even if you think you have a strong credit rating, it pays to review your credit report before applying for a car loan. Credit score plays an important role in determining the interest rate you’ll receive. Check for possible reporting errors; identify open accounts that can be closed; and review for any signs of identity theft. Be sure to correct any errors promptly. Contact one of the three major reporting bureaus to order a credit report: Equifax, Experian or TransUnion.
Explore all loan sources before you buy.
Dealer finance departments offer one-stop convenience. Several loan options are available outside of the dealership. Go online to comparison shop for interest rates. Online auto lenders offer competitive rates, a convenient application process and fast response times. Banks and credit unions can also provide vehicle loans, but may require branch visits and/or pre-shopping to select your car before approving a loan.
Evaluate your purchase incentive options.
Dealers will usually offer a choice between a cash rebate or a discounted financing rate, but not both. You may come out ahead by selecting the rebate and applying it to your purchase price, then using your own low interest rate loan (instead of taking the dealer’s rate offer). Bring a calculator of laptop to the dealer to see what option is best for you.
Approach your purchase as three different transactions.
Treat the car-buying process as three separate transactions: 1) financing; 2) vehicle price; and 3) trade-in value. This strategy will maximize your negotiating opportunities and simplify the transaction by breaking the process into three manageable parts.
Review your contract closely.
Consider taking your contract outside of the dealership to read it carefully and without pressure. Don’t sign the documents until you know your interest rate, total amount financed, length of loan and trade-in value. And never sign a contract with blank spaces, or rely on oral promises.
Select the length of your loan carefully.
Match the length of your loan term to the length of time you plan to drive the vehicle. Buyers who take out longer terms can find themselves “upside down” on their loan – that is, owing more on the car than it’s worth in trade when it comes time to buy a new car.
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