Buying a new car is an exciting experience, but it usually takes some planning. Most car buyers take out an auto loan to help spread out the cost of a new car purchase over a few years, as paying for the full price of a new car all at once can be quite a financial burden. Since they’ll be living with this loan for a while, most buyers look for the best deal they can find, which often means doing some research to find the best interest rates in the area.
If you’re in the market for a new car, you may be wondering, how do I find the best auto loan rates near me? Let us guide you on what steps you should take to find the best auto loan for you and how to compare loans when doing your research.
Steps to Take Before Applying for an Auto Loan
Consumers are often unsure of what to do first when starting the auto loan shopping process. It may be a surprise to find out that the first step has nothing to do with researching lenders or comparing interest rates at all. The best place to start your auto loan research is by reviewing your own finances.
Review Your Credit Score
Lenders will use your FICO credit score to help determine the level of risk you pose. This will also help them decide how low of an interest rate they are willing to offer you and if they’re willing to offer you a loan at all. Essentially, the higher your credit score is at the time of applying for your loan, the more likely you are to get a loan, and the lower the interest rate you will be able to obtain from your lender.
To ensure your credit score is the highest it can be, review your credit report before submitting any loan applications. This will give you the chance to dispute any mistakes with the three credit bureaus (Equifax, Experian, and TransUnion) and increase your credit score as much as you can by the time you apply. You can obtain a free credit report every year at AnnualCreditReport.com and use this report to review your credit history and dispute negative reporting as needed.
Save for a Down Payment
Most car dealerships will require a down payment toward the car purchase, which is an up-front dollar amount paid at the time of car purchase. To ensure you are prepared when you find the right car for you, it’s a good idea to start putting money away early for a down payment.
Many car dealerships will offer a zero-dollar down payment special if you use their in-house lender for an auto loan, but this might not be as good of a deal as it sounds. Obtaining your auto loan through your own means can oftentimes lead to financial savings, as you will be able to shop around and find the best financial terms for you instead of being locked into the dealership’s special zero dollars down loan, which may come with a higher interest rate and increased fees.
Research Potential Auto Loan Lenders in Your Area
You can easily do an online search for helpful auto loan information on the various lenders near you. Starting by reading online reviews of the lenders in your area can be helpful in narrowing down your options before putting in any loan applications. Look for lenders that offer special auto loan deals or services. For instance, Capital Credit Union works directly with multiple northeast Wisconsin dealerships through the Capital CarFinder program. They can help you find the right car for the right amount and at a great rate.
How to Compare Auto Loans
While you’re comparing auto loan lenders, you’ll also want to compare both the required down payment and the interest rates and loan terms they offer. Using an online auto loan calculator can be a helpful way to play around with various down payment amounts, interest rates, and loan repayment terms to see how they will affect your future finances.
Consider a Down Payment That Works for You
Looking at the down payment amount required in order to obtain an auto loan is one of the easiest parts of the loan to compare. Are you able to pay the required down payment up front or not? If you are unable to lay out that much cash at the time of car purchase, then you may need to shop around for a loan with a lower down payment.
If you are able to make a larger down payment, you may want to consider doing so. A higher down payment can mean both a shorter loan term and a lower interest rate, so you will be paying less for the car overall. Look over your personal finances to determine the amount that suits your fiscal needs best.
What Is the Monthly APR?
Last but not least, when deciding between auto loans, you need to compare the interest rates and annual percentage rates (APRs) of the available loan options. The APR determines how much interest you will pay each year over the loan principal, including fees. A loan with a higher APR means your monthly payments will be higher and that you will pay more in interest over the life of the loan.
As we’ve mentioned, interest rates can vary based on your financial situation, including your credit history. They can also vary depending on how much of a down payment you make or how long of a repayment period you choose. Talk to lenders to determine who can provide the best terms at the most competitive interest rate.
When comparing auto loans, it’s important you consider the whole package. Look at your finances, consider down payment options, and compare interest rates so you can find the best auto loan rates near you. If you live in northeast Wisconsin and would like to discuss your auto loan options, contact Capital Credit Union today. You’ll be driving your new car in no time!
