How to Get the Best Vehicle Financing Deal
Getting the best deal on automobile financing isn't as easy as accepting the first offer you are presented with. To make sure you get the lowest possible interest rate, good dealer incentives, and a monthly payment that works well for you, you will have to do a little legwork. The effort can save you thousands of dollars.
Check your credit report and make necessary improvements
Bring your own credit report with you
Make sure the report is current (within the last 30 days) and that it is complete with a FICO score (a number ranging from 300 to 850 that is generated by the Fair, Isaac & Company that helps lenders assess lending risk). The higher your score, the greater chance you will qualify for the best financing deals.
Consider a co-signer – carefully
Shop for the best deal
If you choose to go with dealer financing (where the dealership shops for loans for you), be sure to ask about manufacturer's incentives, reduced finance rates, and cash back on specific car models.
Financing offers can be tricky. Don't be fooled by an advertised low monthly payment. If the length of the loan is long and the interest rate high, you will be paying more than you may have to. And be wary of extremely low promotional APRs. Though you may qualify for particularly low rates by making a large down payment, it may be more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.
Beware zero percent financing
Though you may not have to pay interest on the first half of the loan, you could be charged interest on the remainder – and have to pay it first. This is called "front loaded" interest. You may also be required to repay the car in three years or fewer – resulting in a very high monthly payment. Consider the example:
Zero percent financing can be elusive. It is only offered to those with very good credit, which is determined by the lender. And it is often not available for the most popular cars and trucks.
Though zero percent financing can be an economical way to buy a car, very often you will pay less over all and have a more manageable payment by negotiating the price down and paying a reasonable amount of interest instead.
Read and understand your loan document
Is it worth it to take the time to repair your credit, learn about the lending process, shop around, compare rates, and negotiate? If you want to save a lot of money, the answer is an unequivocal "yes." By doing so, you can drive away secure with the knowledge that you received the best deal possible.
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