To find the best auto loan rate, consumers should research rates available to their credit score range, consider the length of the loan term, and make a down payment or trade-in. Online shopping and checking with current financial institutions can also help. Working positively with the Business or Finance and Insurance Office can lead to better rates and deals.
The most important factor in finding the best auto loan rate is being an informed consumer. Like the price of cars, rates are negotiable. Consumers need to know their credit score and the rates that are available to those within their credit score range.
Before you walk into the dealership, some research will help get you a great auto loan rate. Online shopping is a good source. There are websites that allow potential buyers to enter their information and shop between popular banks. Consumers should also check with the financial institutions they currently use. Institutions that already have their business are likely to try to maintain it. Insurance companies, banks, and loan and mortgage companies are all good places to call for the best auto loan rate.
It’s important to note that the lowest car loan rate doesn’t always guarantee the lowest car payment. The length of the term can greatly change the amount of the monthly payment. A short-term loan almost always has a lower rate, but will cost more on a monthly basis. Longer-term loans have slightly higher rates, but lower monthly payments.
A down payment or trade-in will also affect the loan rate. If a consumer can put 20% off their purchase via cash or trade-in, or a combination of both, a lower rate is sometimes available even for those with credit problems. Since it also reduces the amount financed and therefore the interest earned, it also reduces the lifetime amount of money paid for the car.
The Business Office is also known at some dealerships as the Finance and Insurance (F&I) Office. At this office, the buyer is not only provided with financing opportunities, but is also offered extras such as extended warranties, paint or fabric protection, rust proofing, siding, alarm systems, and window tinting. Keep in mind that all these extras will increase the amount of the loan and therefore the monthly payment.
If a consumer has been pre-approved for a loan before walking into the dealership, the F&I Manager is more likely to find a low auto loan rate. Dealerships do benefit from financing, although these benefits have been limited in recent years by lending institutions that were concerned about dealerships making unfair profits for individual consumers. The dealership wants consumers to finance at their location to earn that commission. They will work hard to ensure that consumers do their business with banks that will pay the dealer a profit.
For example, suppose a consumer walks into the dealership with a pre-approval letter from their bank saying that the bank will finance a car at a rate of 6.49%. The F&I manager makes a few calls with his banking connections and can find a bank willing to finance that consumer for 5.49%. The bank may be offering a rate of 4.49%, with one percentage point going to the dealer. The F&I Manager makes a commission for the service of finding a better deal for the consumer than they could find on their own. The consumer was able to find a great rate, the bank got a loan, and the dealer got a commission, so everyone got something out of the deal.
Perhaps one of the most important factors when working with a business manager to get a good auto loan rate is to remember that they are working professionals. They are trying to earn a nice commission by providing consumers with services that may or may not be useful. The best way to deal with car dealerships, like any sales professional, is with positive demeanor. A negative and distant attitude will make these sales professionals less likely to work with a consumer. Being positive, knowledgeable, and smart about the subject is the best way to get a great car loan rate.
Smart Assets.
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