Getting the best car loan is not that easy. But if you follow some steps you may get a better deal than what you could have got. Its just like an interview – if you are prepared you may get the job. If you do your research and negotiate we are sure you will get a low rate car loan.
Read this article in full. Do not skip any step. We are sure once you finish reading you will get enough ideas on how to get the best and a low rate car loan.
Without further ado let’s jump into how you can get the best car loan.
Step 1) First pinpoint the car you want to buy:
Have you decided which car to buy? If not you are at a wrong place. Go, take some test drive of the cars you are interested in and first be very sure about the car you are looking to buy.
Though this is off topic it needs a mention – in short the car you want to buy should be within your budget and should fill your purpose – like how you want to use it, how many people will travel in it, where you will park it etc. These pointers will give you an idea of the type of car you should buy. And yes one more point – don’t be obsessed with brands – go for value. All car manufacturers produce good cars, so brand should not be your first choice.
Ok.. back to the topic.
Now that you have decided the car you want to buy – its time to shop for a car loan.
Why we asked you to first pinpoint the car you want to buy is that you know the price of the car well in advance before you shop for your car loan, so that you know how much amount of loan is required.
Step 2) Use the internet to do some research
Internet is not just for connecting with friends. Do some research on current car loan rates? Ask your friends who have a car, ask your boss, parents, ask as many people as possible – know as much as possible about the interest rates. For example at the time of writing this article car loan rate varied from 3.99% to 10%. Now that’s a huge difference. You should aim for the lowest possible car loan rate.
Step 3) Its time to know your credit score
If you don’t know, you can get your free credit score form AnnualCreditReport.com. Go there now and find your credit score. If you find anything wrong with your credit report you must report it to credit bureau and get it corrected. This will improve your credit score and help you get loans at lower rates.
Step 4) Save some money
You have heard it a thousand times, but have never paid heed to it. Now you will understand its value. The more downpayment you do, the less loan you take and the less interest you pay. You get the point?
It means the more you save the more you can pay and avoid the car loan as much as possible. Buying a car on 100% financing is not a good idea. Essentially what you are doing is increasing the value of your car. Which you do not want. See if you can defer buying a car for 3-4 months and save some more money. The more you save the better. What we are trying to say is – pay as much as possible as downpayment and decrease the loan amount of your car.
Step 5) Find the best deal
By this time you are well prepared. You know the current car loan rates, you know your credit score, you have pinpointed your car and you know how much its going to cost you, and you also have saved some money as downpayment for your loan. Great. Now is the time to go for the kill.
Start your car loan search (leave your car dealer alone – they are also in contact with some car loan lenders but frankly they will charge you higher. Why? Because they have to pay commission (in percentage of the loan) to the dealer. It is you who will pay that extra commission and you will never know because these lenders will charge you higher to compensate the commission they have to forego. You will do yourself a favor and save a lot of money if you get your own car loan from someone other than your car dealer.
How to search:
1) Ask your friends if they know someone working in any car loan company.
2) Research the internet. Search for car loan lenders. Fill at least 3-5 car loan forms online. Don’t do any mistake. Fill it correctly.
3) Buy 3-4 car magazines. You will find at least 10-15 car loan dealer advertisements. Contact them.
Wait for sometime and you will start getting loan offers. The first thing you should do is ask for their lending rates and ask if it’s negotiable. Most of the lenders’ rates are negotiable.
Write down everything in a piece of paper or in a spreadsheet.
Now choose 5 dealers with the lowest car loan rate.
Step 6) Negotiate
This is the best part and you will enjoy it especially if you have a good credit score.
Leave the lender who offered you the lowest rate. Call the other four lenders one by one and tell them the lowest rate offered to you. Chances are that all the four lenders will match the lowest rate offered to you.
Now call the lender who offered you the lowest rate and tell him/her that others are offering you a lower rate (he/she will never know the reality so do not bother, we are saving money here). If he/she reduces the rate – great. Now again call the four lenders and ask them to match the lowest rate. Rinse and repeat until you get the LOWEST rate on your car loan.
Step 7) Buy Your Car
Everything done. You know the car you want to buy. You also have enough money to give as downpayment and you also got your car loan at a low rate. Now go and buy your car and feel happy about it.
Step 8 ) Enjoy your car 
Enjoy your car but make sure that you pay the loan installments on time so that you do not fall into a debt trap. If you can save some money, part-pre-pay your car loan. Even if it involves some pre-payment penalty, you must try to pre-pay your loan – it will save you money. Most car loan lenders do not have a pre-payment penalty, even if they have don’t worry about it. Pre-paying any loan for that matter is a great way to save money – penalty or not.
We hope the advice in this article will help you to get the best and a low rate car loan. If it does please recommend this article to your friends.
Disclaimer: This article on getting the best and a low rate car loan is for information purposes only. We don’t know your financial situation, so we can’t guarantee if this article will be of any help. You must do your own research before taking any decision based on this article. However this article will help you to get some knowledge on how to get a low rate on car loans.