There are several ways to save money on auto loans. The first thing is to make sure your credit score is as good as possible, since you will probably be offered a rate that depends upon your creditworthiness. This is not a quick-fix though … it is something that takes time and must be monitored. If your credit rating is poor, it may be possible to receive a better offer if you have a co-signer with good credit.
Another helpful resource is a loan broker. By applying to a loan broker, you can easily get quotes from a number of lenders, which will make it easier to choose one that offers the best rates and options for the loan you need. Quite simply, it’s better to have the lenders competing with one another for your business.
You may also want to consider alternative methods of finance. In some cases, the equity in your home may prove to be a better financing option. If you can take out an additional homeowner’s loan instead of an auto loan at a better interest rate, you may save money. However, you do place your home as collateral on your automobile in this case, which if there is any question at ALL in repayment is a riskier option.
Dealer financing is often a poor option. Before you decide to accept their terms, no matter how good they may sound, check into the terms you can receive from an independent lender. And before you are swayed by the $500 rebate they offer along with their financing, or the offer of a period of time with no payments, be sure to add up the total payments in that case and compare the bottom line. You will usually find that the higher interest over time will end up costing you more than you save with the rebate, or that the free period costs more than if you made payments all along with a different lender.
You might even want to consider leasing a vehicle instead of buying one, if your credit is good enough and you can find a good lease offer. Payments are often less than those for buying a car outright. However, the flip side is that you don’t own anything in the car, and after the lease expires you own nothing.
Careful consumers will explore all their options, and factor in the downpayment, total payments over time, and any other factors that enter in to the deal in order to make a decision. While you are researching, find out how much your insurance payments will be as well, so that you get the whole picture of your financial obligations before you make a commitment. And with the price of gas these days, it is wise to also consider how one model compares with another regarding fuel costs, as this is becoming more and more of a factor as well.