Most people take ample time to find the best deal on a car, but few take similar care when finding a car loan. But failing to get the cheapest car loan available means you’ll spend more over the long-term and may even agree to terms you wouldn’t have had to otherwise.
Finding a great deal on a car loan means considering the total cost associated with the loan to the monthly payment, as both need to be affordable. And failing to look beyond the monthly payment could mean you sign up for a loan that is less than ideal.
To help you find the cheapest car loan around, here are some tips for managing the process.
Check Your Credit Score
Your credit score will play a large role in determining what terms you will be offered. By checking your credit report and associated score in advance, you can use the information to estimate what you would qualify for or if you are at risk of being turned down.
If your score isn’t particularly favorable, make sure there are no errors on your credit report that may need to be disputed. Then, you might want to take some time to improve your score before seeking the necessary funds to purchase a vehicle.
Don’t Start at the Dealership
Some people don’t realise you can be approved for a loan before you even set foot on the car lot. Not only does this give you more borrowing power than coming in without an approval, but it also means you can explore options at any financial institution you wish.
You can begin with loan comparison websites to get some starting information and consider contacting institutions like local banks, online financial institutions, and credit unions as well as larger lenders. While you won’t know your exact terms until you apply for a loan, you can review their interest rate ranges before submitting an application or having your credit run.
If you choose to secure your financing at the dealership, you won’t be presented with as many options. That doesn’t mean you can’t get a good deal, just that you won’t have the chance to review the details of multiple offers before moving forward with the purchase. For low income earners with limited income, there may be better options than a dealership – check out these types and places where you may be able to get a free or very low cost car.
Talk Price First, Not Monthly Payment
The price of the vehicle should be the point you negotiate with the dealership, not the monthly payment. If you begin by telling them your preferred monthly payment, they can use that information to find a loan that meets that expectation even if you could have secured a cheaper car loan.
Instead, after getting your preapprovals (which gives you an idea of your monthly payment in advance), only discuss the sale price of the vehicle with the dealer and don’t bring up the monthly payment as part of the negotiation. That way, you can work to get the lowest price for the car which can help make your monthly payment lower and the total costs associated with the loan cheaper.
BIG tip: Most dealerships will try to sell you finance from their dealership, this is obviously is not done with your best interest in mind. In addition they can be very aggressive on how they do this. Avoiding the sales pitch may be in your best interest and the best way to do this is by already having your finance in order. Check out how you can get the best finance for your needs here.