How to get the lowest auto loan interest rates
Find out how to get the lowest interest rates on your auto loan and 0% APR.
People often pay significant interest on their car loans, but few know that with an excellent credit score you can lower your interest rate. Because of this, many people overpay their monthly payments. A 0% APR is possible. It sounds like a scam, or that it’s too good to be true. But it isn’t. People with good credit reports can negotiate these low auto loan rates with their auto dealer.
Where to find 0% APR loans
Finding 0% APR loans is simple. Since it’s a great marketing tactic, any car dealers who offer them will advertise them. Still, each deal has different loan terms and it’s important to consider many different options when buying a car.
A quick google search should tell you if the car you’re looking to buy is eligible for 0% interest loans. Or, if you don’t know what car you want, you can go directly to a local auto dealer’s website, as there should be a page describing their special offers and incentives.
It’s more common for new cars and recent models to have 0% financing, so keep that in mind when buying a car.
How to qualify for low interest loans
Qualifying for a 0% APR auto loans isn’t a cake walk though.
To be eligible, buyers generally require a long credit history, a good credit report and excellent credit. This requires timely payments on credit cards and other loans or leases. What counts as good or bad credit can depend on the auto dealer, but having bad credit generally means higher interest rates.
A credit score of 700 or upwards might qualify you, but you still might need higher, so it’s important to find out what the minimum credit score is for your chosen car dealer.
What to consider before buying a car with 0% financing
Before starting loan applications, consider that a 0% APR loan isn’t always the optimal move for your car loan. Factors such as monthly payments, lease buyouts, loan terms and alternative deals are important factors to consider.
Sometimes a particular car is eligible for multiple different offers and incentives, such as a rebate. The decision of whether to take a rebate or 0% APR is a tricky one that involves a lot of weighing up options. If you don’t know how to decide, an auto loan calculator can help you decide the optimal choice for you, based off how much each option will save you.
The length, size and duration of the loan payments needs to fit within your budget.
Occasionally, 0% APR loans only offers repayment periods of 36-42 months. This may mean larger monthly payments than you were prepared to pay and mess with your budget.
However, longer payments aren’t always better, repayments periods of up to 72 months could mean losing money because your car depreciates faster than you can pay off the car. In this situation, it might be better to consider buying a car with a low interest rate, instead of 0% APR.
Is a new car the right choice for you
No and low interest auto loans are incredibly tempting, but a brand new car is a big investment.
How much your car is worth depreciates significantly as soon as it is driven, and after a couple of years, cars are worth thousands less than they initially were.
Second hand and used cars may have higher interest rates, but they depreciate at a much slower pace than a new car will. It may be a better option for someone with a smaller budget who is only looking for a car to drive for a few years.
Your other options
Just because taking out a loan through your car dealership is the most obvious choice, it doesn’t mean it’s the only one. Paying cash and taking out a loan through a bank are also options that may work for you.
Getting loan amounts directly from a bank, like Bank of America, will present a variety of options that you can consider if you aren’t happy with the options provided by your car dealership. However, it may mean higher interest rates.
What to look out for when negotiating loan terms
Negotiate your other terms first
Negotiating the price of the auto and it’s associated products and services first is essential before negotiate the 0% APR loan. If you negotiate the 0% APR loan first and get pre approval, you’ll find the car dealer negotiating everything else higher as a compromise for the 0% loan. This way, you’re getting the best deal possible.
Double check and verify the conditions of your loan term
You might find certain dealerships and completely honest about the specific terms of their offers, so they can get more money. Make sure you know what the deal is written as so you don’t get conned.
Where to go from here
Armed with a good understanding of your options and choices for a low interest auto loan, what should you do now?
First you should check your credit score and discover what your rating is to see what loans you can qualify for. Then, you might want to get quotes for any vehicles you are considering. This is also a good time to get quotes on registration and car insurance, so you can budget for the total cost of buying a car.
By doing this, you can prepare for getting the best deal possible from your car dealership.