So, you’ve finally found the ideal car for you. It’s the make and model you want, color you want, everything you’ve been dreaming about. You’re ready to drive it home, radio cranked, driver’s seat adjusted just perfectly for you.
But wait—there’s just one small detail to knock out first. Unless you’re into playing real-life Grand Theft Auto—and we hope you’re not—you’re gonna have to figure out how to pay for that beast. Shopping for a car loan can be a little overwhelming, but here are a few tips to help you make sure you’re getting the best deal.
1. Interest Rate: This is what you pay for borrowing money. The lower the interest rate, the less you’ll pay over the life of the loan. Shop around for the best rates, and never be afraid to negotiate.
2. Loan Term: The loan term is the length of time you’ll have to repay the loan. Longer terms can mean lower monthly payments, but you’ll also pay more in interest over the life of the loan, so it’ll cost you more (sometimes a lot more).
3. APR (Annual Percentage Rate): This is your total cost of borrowing money, including the interest rate and any fees associated with the loan. Be sure to compare the APR of different lenders to make sure you’re getting the best overall deal.
4. Fees: Some lenders may charge fees for things like loan origination (getting the loan set up), paying it off early, or late payments. Be sure to factor these fees into your overall cost of borrowing.
5. Credit Score: Your credit score plays a key role in determining the interest rate you’ll qualify for. The higher your credit score, the lower your interest rate will likely be.
6. Lender Reputation: Do your research and choose a reputable lender. Look for reviews and ratings online to make sure they’re legit and that they haven’t done anything shady to other borrowers.
7. Pre-approval: Before you start shopping for a car, get pre-approved for a loan. This will give you an idea of how much you can afford to borrow and can help you negotiate a better deal. It also is usually a better deal than the financing a car dealership will offer you.
8. Financing Through the Dealer: While it’s convenient to finance your car through the dealership, they often make a significant profit from the financing they offer—so you’ll likely be able to get a better deal by shopping around. Compare rates and terms from different lenders.
9. Refinancing: If you’re not happy with your current loan, you may be able to refinance and get a lower interest rate. (Just pay close attention to any extra fees that might cancel out the advantage of the lower interest rate.)
10. Don’t Be Afraid to Negotiate: A lot of people don’t realize this, but car dealerships usually have room to negotiate the price of the car and the terms of the loan. Don’t just pay full price, and don’t be afraid to walk away if you’re not getting the deal you want. Leave your number and tell them to call if they can get closer to the numbers you want. (A lot of times you’ll hear from them within a week or so). Meanwhile, keep shopping: there are plenty of other dealerships out there.
