When purchasing a new car, before you choose a lender, you have to shop for the lowest rate. There are quite a few lenders, banks, credit unions, and on site lending institutions that you can choose from when you do buy a new car; for this reason, you have to assess each of them, in order to ensure you do find the best deal, and find the lowest interest rates possible, when the time comes for you to choose the lender for the new car that you are going to buy.
Never take the first rate you get –
Just like the purchase itself and choosing a new car, the loan process is the same. You have to shop around, in order to get the best rates. It is possible that the first quote you get is the lowest one, but you will only know this if you take the time to shop for lower interest rates. You should visit a few local banks, credit unions, compare the lenders on site at a dealership, and other private lines of credit, in order to know you have truly found the lowest rate. If you are lazy, you might be leaving a few percentage points out there, and greatly overpaying on the loan amount.
Go to credit unions –
A credit union is going to offer great interest rates. Especially if you have an account with them already, you can get a much lower interest rate through these institutions. Although the highest credit rating isn’t a must, like any other credit you apply for, the higher your credit score, the better. So, visit a few of these institutions, and compare the rates, to find the best deal, and the lowest interest on the purchase price of the car you choose to purchase.
Go to your bank –
Bank lenders are a little more picky, but if you have an account at a bank, and have a fairly stable history with them, along with a good credit rating, it is possible to get a lower interest rate on the loan. In addition to your bank, you should consider a few others, so that you can see what they have to offer as far as rates, and the amount they are willing to finance to you. As a buyer, it is up to you to find the best deals, so the more places you go, the more you are going to save.
Consider on site financing –
Especially if you are a young, first time buyer, or if you have a poor credit score, you might have to go through the dealership lender, where you buy the car, for your financing. You should visit a few dealerships, so that you can compare the price of the car, and the interest rate and terms; eventually, you will find one that is lower than the others, and has the car you want on the lot, for a reasonable price, but only when you do compare a few sites, before you decide where to buy.
Go Green –
It is possible that certain lenders, such as banks and credit unions, will offer you a lower interest rate (.5% approximately), if you buy an eco friendly car. So, if you choose a hybrid, or some other electric powered car, you might get some form of a discount in terms of the interest you will pay. It might not be the case with all lenders, or even most lenders, but if you are considering an environmentally friendly car, it is worth asking if there are any specials on the interest rates that lenders charge, when you choose to finance the car.
Use a current creditor –
Just like bundling policies for auto, home, life, and other insurance policies you need, your financing can also be done in a similar manner. If you have a few lines of credit open with banks, credit cards, or other lenders, you can always ask them for some kind of deal or discount, when you choose to finance the car purchase with them. Especially if you have a clean borrowing history with that lender or creditor, they might be willing to provide you some kind of deal or savings in terms of interest, if you do choose to take out one more line of credit, and finance your car purchase through them.
Ask for savings –
In many instances, it is worth asking for a lower interest rate. Especially if you have been approved by a few lenders, and have a rather good credit score and rating, it never hurts to ask. If you really want to go through a particular lender, asking if they will offer a few points lower on the interest rate is worth a try. You can also ask if you put down a larger down payment, whether or not they will offer you a better interest rate, or better financing terms. Many, if not most lenders, are going to be stern; but, if you are a customer that is trustworthy, and has a pristine credit rating and score, many might reconsider, and offer you some form of savings if you choose them, as opposed to the other lending institutions that you can go with, when you have to finance the purchase price of your new car.
There are many ways to save, and it is always possible to find an interest rate that is a little lower than the initial terms you heard, but you have to look for them and do the maths. Buyers must take the time to shop for savings, to look for the right lender, and to find the best possible terms on the financing they need, when purchasing a new car. Lenders will fight for your business, especially if you are a trustworthy customer (with great credit history). So, don’t settle on the first financing option you get; visit a few other lenders and institutions, and compare the terms that are being offered to you, to ensure you do get the best possible deal and terms when you finance the purchase. Just make sure that you sign the agreement with your eyes fully open. Check out a calculator like this one before you seal the deal!
William Kelly is a financial advisor from Sydney, australia.