In recent years, we have seen a steady incline in the use of public transportation and rideshare companies like Uber (with over 160,000 drivers). However, the need for Americans to own their own vehicle is still as strong as ever, with statistics showing that 91% of US households own at least one car. Out of that 91%, almost 85% of those cars were financed through a loan or a lease.
When it comes to acquiring a loan, most people assume that you go to the dealership, pick out the car you want, and sit down with the dealer to negotiate your monthly payments and interest rate. In reality, that is one of the absolute worst ways to go about financing a new car! With the average dealership marking up costs at 2.5%, opting to go with a separate lender is a far better option.
If you’re looking to secure the best loan available, then follow these steps to put yourself in charge when speaking to a lender.
Step 1: Know Your Credit Score
The auto loan industry is fiercely competitive, and that competition works to your advantage. You can check your credit score for free online and know exactly what types of rates you can expect. If you find that your score is less than perfect, paying off any outstanding loans or bills can give your score the boost it needs to open up new opportunities for better rates.
Step 2: Simple Math
Calculating monthly payments and the total interest you will end up paying based on the length of your term is easier than ever with online loan calculators. Combining step one and step two will give you a great idea about what the outlines of your loan should look like. This will also let you know when a lender is offering something worse than you deserve.
Step 3: Research
Utilizing state and federal websites, along with the Better Business Bureau, you can easily check into a lender’s track record. You can also find customer experiences online, as well as pros and cons, side by side comparisons, and a lender’s average interest rates.
Compare multiple ones until you find a few that offer what you are looking for. According to auto.loan, “…there are deals with 0% interest, but these types of offers will not show up at banks or credit unions… However, proceed with caution – sometimes this 0% interest deal is in place of a different promotion, such as a rebate worth $1,500 for example.”
Step 4: Know the Terms
You will most likely have the option to choose between a fixed or variable rate loan. While the variable options may look appealing with an initial lower rate, the amount of interest you pay each month can change drastically. Often times, you will find yourself paying for far more than you bargained for.
If you can lock in a great fixed payment, do it! You’ll thank yourself in the long run.
Step 5: Make a Plan and Stick to It
Examine your monthly budget, and decide on the term length you can afford. Contact the lenders you have chosen and push for the best loan options possible. Don’t forget to ask about deals and incentives, as these are often not advertised.
Keep your head held high, and use the confidence from knowing your credit score and what you’ve come up with using a loan calculator to hold out for the best rates possible. Compare the offers you’ve been given, and don’t be afraid to tell a lender that you were offered a better deal elsewhere. Remember, they are in competition with each other to get the most customers, and your satisfaction makes all the difference in boosting their numbers.
Step 6: Enjoy Your New Car
Following the above steps will ensure that you never get stuck with an unfavorable loan. Take charge, and get the financing you deserve! It will make owning your new car all the better.
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