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Tips for Saving on Auto Loans

Although buying a car today offers tremendous opportunity since the automotive industry has been hit hard by the economy, consumers need to know all they can for saving money. Whether buying a new or used car, buyers need to take time to learn all they can about the preferred car, interest rates, and the way in which financing is done. Regarding auto loans for new vehicles, consumers need to know the right questions to ask.

Consumers should always ask about the interest rate. After all, auto loans come with different rates. While the rates may not vary dramatically, there are differences among lenders so locking into the lowest rate possible would save money. Consumers also need to look at several lenders for auto loans, finding what the annual percentage rate being applied is. This way, the consumer would be able to make needed comparisons. In addition to interest rates, people need to know the way in which the APR is being calculated. The reason is that each lender uses a slightly different calculation, which can have a negative or positive impact on the bottom line.

People need to ask whether the loan comes with any penalties or fees. While reputable lenders outline every detail of the loan, dishonest lenders hide a number of penalties and fees, carefully placing the information in the small print of the terms and conditions of the loan. The borrower has the responsibility to read every word and ask questions and if at any time the answers provided make no sense or seem too vague, then this should be viewed as a red flag.

Next, for the person looking at auto loans through the dealership, it would be important to get final approval prior to walking off the car lot. Unfortunately, it is common practice for some dealerships to tell a person that the loan was approved only for the individual to receive a phone call the following day to learn the loan fell through. However, the lender would then advise the buyer that while the loan was not approved, they would tell the car buyer that they have another lender that can lend the money but the interest rate would be more. Instead, auto loans being offered through any dealership should be firmed up 100% or the deal should be shut down.

Regarding auto loans for used cars, the rules changes slightly. While buyers that prefer used cars love the ability to save money over the price of a new car, often a mistake is made in that the auto loans that go along with used cars are not searched thoroughly enough. The truth is that loans for used cars need to be chosen carefully or the borrower could end up paying far more than needed.

For starters, sellers of used cars are highly motivated by money. When buying from a dealership, many agree to cut a small portion of their profit off the price of the vehicle but only if the dealership handles the loan. While auto loans such as this are not bad, just as with borrowing money from a bank or dealership with a new car, the buyer should look at a number of dealerships to compare prices and terms. That way, getting the best loan and for the lowest interest rate is more likely.

In the case of auto loans for a used vehicle, most experts agree that it would be to the buyer’s advantage to look at financing options prior to shopping for a car. One of the first steps would be for the person to determine his or her FICO credit score. If the score is low and the person could take a little more time before buying to improve the score, this would result in a better loan and at a lower interest rate. For both new and used vehicles, buyers need to consider everything pertaining to auto loans to get the best deal possible.

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