Five money saving tips on auto loans no expert will tell you
You’ve been looking for the perfect car for a while now and finally found it. You’re ready to get behind the wheel and drive off into the sunset, but first, you must pay for that car.
If you’ve ever shopped for an auto loan before, you know how stressful it can be. So many factors go into choosing the right lender and getting approved—and then there’s the whole interest rate thing.
To help you, in this article we will share money-saving tips on auto loans and show you how to save some serious cash while still getting what you want when it comes time to finance your new vehicle.
1) Decide what you can afford
Knowing your budget before shopping for a car is important, so you don’t get in over your head.
First, calculate your monthly income after taxes to determine what you can afford. Then, subtract all your other monthly expenses—rent or mortgage payments, student loan payments, credit card bills, etc.
Finally, see how much money is left over each month. This is the amount you have to work with regarding car payments. Remember that you’ll also need to factor in the cost of gas, insurance, and maintenance when determining your budget.
2) Get pre-approved for a loan
The next step is to get pre-approved for an auto loan from a lender. This will give you a better idea of what interest rate you qualify for and how much money you can borrow.
Getting pre-approved is simple – just fill out a short online application with basic information about yourself, such as your name, address, income, and employment history. The lender will then pull your credit report and give you a loan decision.
3) Shop around for the best interest rate
Interest rates on auto loans vary widely depending on the lender, so it’s important to shop around to get the best rate possible.
Start by checking with your local bank or credit unions for car loans, which may offer special rates for their members. You can also compare rates from online lenders.
Once you have a few different rates in hand, it’s time to negotiate with the lender for the best rate possible. Remember, the interest rate is just one part of the loan—you’ll also need to consider the term length, monthly payment, and down payment when choosing a loan.
4) Consider a longer loan term
One way to lower your monthly payment is to extend the loan term. This means you’ll be paying off your car for longer, but it can make it more affordable in the short term.
Of course, you’ll end up paying more in interest over the life of the loan if you choose a longer term, so it’s important to weigh your options carefully. A shorter loan term may be the better choice if you can afford the higher monthly payments.
5) Make a large down payment
The more you put down upfront, the less you’ll need to finance – and your monthly payments will be lower. A down payment also helps reduce the overall cost of the loan, as you’ll be paying interest on a smaller amount of money. And if you have equity in your trade-in vehicle, you can also use that towards your down payment.
Shop around and compare rates
These are just a few tips to help you save money on your next auto loan. Remember, the most important thing is to shop around and compare rates from multiple lenders before deciding.
