Buying a car can be a stressful experience. You want to get the best deal, but it seems as though that is made difficult by the pushy salespeople and the cost of the loan itself. Getting the best deal on an auto loan requires a combination of negotiating a good deal on the price of the car, as well as getting the best possible interest rate.
If you want the best deal on your next auto loan, here are 5 tips to help you along:
1. Improve Your Credit
The best interest rates are reserved for those with the best credit histories. If you have a solid credit history, you can command better interest rates. Take the time to check your credit score and figure out how to improve it. Often, improvement just means paying your bills on time, reducing your debt level, and avoiding applying for new credit until you are ready to get your auto loan.
2. Negotiate By Email or Phone
When looking for the best car price, consider negotiating by email or phone. Contact a dealership and ask for the best price. Then, you can take that price to two or three other dealerships -- doing it all over email or phone (email is better, since you have something in writing). Get the dealers to bid against each other before you even show up at a single dealership.
3. Shop Around for Your Loan
Don’t just go for dealer financing. You might be able to swing a better interest rate if you get pre-approved for an auto loan with your bank or credit union. Find out what you can get, and then let the dealership know. See if the dealership can beat what you’re pre-approved for.
4. Consider Buying New
Depending on your budget, you can get a great deal on an auto loan by purchasing a new car. New vehicles often come with manufacturer incentives, along with dealership incentives. Indeed, no interest financing, and rates below 1% or 2% are usually only available on new cars. Sometimes, it’s even possible to get breaks on the car price when you buy new.
5. Keep the Loan Term Short
The shorter your loan term, the less you pay overall. A shorter loan term usually comes with a lower interest rate. You pay off your debt faster, and with a lower rate, and that means you save money over all. Don’t get a longer loan just so you can “afford” a pricier car. Make a bigger down payment so that you don’t need to borrow as much. You’ll end up ahead in the long run.