How to Get the Lowest Interest Rate on Your Car Loan

It's surprising how many people overlook the opportunity to haggle over the interest rate when it comes to car loans. Once you've successfully negotiated a reasonable selling price, it's crucial to negotiate a fair auto loan rate. 

Who wouldn't want to cut down on their monthly expenses by locking in a great interest rate?

Today, we'll guide you on how to snag a lower rate for your car loan.

 

Here are six ways to lower your car loan interest rate:  

 

1. Maintain a good credit score

Maintaining a good credit score is essential. Individuals with excellent credit scores qualify for the most competitive interest rates available when seeking a loan. On the other hand, those with poor credit scores typically face higher rates for loans of similar size, as they're considered riskier borrowers by most lenders. 

If you find yourself on the lower end of the credit score spectrum, dedicating time to improving your score can lead to significant savings on interest over the life of your car loan. A good starting point is ensuring that you pay your monthly bills on time and in full. 

 

Read: How to Improve Your Credit Score

 

2. Negotiate the price of the vehicle

Negotiating the price of the vehicle is a smart move. Before delving into loan terms, aim to strike a deal on the actual car price. A lower purchase price translates to a smaller loan and reduced interest payments. Remember, the sticker price isn't always final, and there's nothing wrong with suggesting a counter-offer.

Research the selling price of the vehicle elsewhere and come up with evidence to support your offer. Every dealership is motivated to make a sale, and reputable ones are genuinely interested in assisting customers to find the right car at an affordable price.

 

Read: 7 Tips to Negotiate With a Used Car Dealer

 

3. Make a significant down payment

Lenders stand to lose more if you default on a larger loan. By putting down a significant amount or trading in a vehicle, you not only reduce the amount you need to borrow but you may also qualify for a lower interest rate.

 

Read: Benefits of Making a Down Payment on Your Car

 

4. Apply with a co-signer

If your credit isn't great, think about getting help from someone you trust, like a friend or family member. They can co-sign your car loan, using their good credit to help you qualify for lower interest rates.

But be careful! If you can't pay back the loan, your friend or family member has to. And if you miss payments, it could hurt their credit too. Having a co-signer means the risk is shared, so lenders might give you a better deal. Just remember, if you don't keep up with payments, your co-signer has to step in and help out.

 

5. Choose a shorter loan term

Opt for a shorter loan term whenever possible. While longer terms may offer lower monthly payments, they also mean paying more in interest over time. Car loans typically range from 12 to 72 months. Choosing the shortest term you can manage could save you thousands of dollars in interest.

 

Read: Short-term vs. Long-term Car Loans: Which is Better?

 

6. Navigate the optional expenses

When you're financing a car, the sales team might offer you various dealer options, upgrades, and extras that can significantly increase your loan. Some of these choices include extended warranties, guaranteed asset protection insurance, VIN engraving, rustproofing, fabric and paint protection, and tire and wheel guarantees. Before agreeing to any of these options, ensure you fully understand what you're getting into. These additional costs can raise your total loan amount and interest rates.

Securing a lower interest rate for your car loan doesn't have to be complicated. Simple strategies can help make it more affordable. If you are looking for a car loan, get in touch with us. We’ll help you secure a loan that meets your needs, no matter your credit score.