If you’re thinking about getting a new car you might also be thinking about financing. Cars can get expensive, and for many consumers the purchase is more realistic and affordable with a car loan. In the long-term you can end up spending much more than you should if you don’t get a low car loan interest rate. How can you be sure you’re getting the lowest rate?
Be sure to check your credit score first, before shopping around for a car loan. Check it for free on Credit Sesame.
Car loan interest rates
Car loan interest rates are the fees that your lender will charge you for borrowing the money. They vary depending on your location and credit score. Those aren’t the only factors that go into determining your car loan interest rate, but they are two of the most important.
When shopping for a car loan it is important to do the right research and see what rates are available.
Car loan interest rate comparison
It’s important to shop around for your car loan. Car loans come from banks, credit companies, and car financing companies. While interest rates do vary from lender to lender, the average car loan interest rate currently can be anywhere from as low as 0% to as high as 5%.
Keep in mind that this is just an average range. Depending on the length of your loan, credit score, the car you are financing, and other miscellaneous factors, your rate may be different. Take advantage of the fact that there are so many different lenders available on the market and compare them to get the lowest rate possible.
Many resources are available to help consumers looking for car loans. You can start with a company that compiles car loan interest rate data for you, like Credit Sesame. Credit Sesame allows you to easily compare loans and rates in one place.
You can also try checking with local lenders. Sometimes local banks and credit unions offer lower car loan interest rates to members and locals. Dealerships offer car loans as well, and while these rates can be great, you might miss out on a rebate or discount. The car dealership might make you choose either the lower rate (if you’re approved) or the discount, rebate, or special deal but not both.
Another great tool is the car loan interest rate calculator. The calculator will help you figure out what you can really afford. It will help you determine your monthly payments, down payment, length of loan, and other minor details, while taking into consideration car loan interest rates.
All these tools are great, but what if you aren’t buying a new car? You can still get a loan for a used car, even if you buy it from a private seller. You can even use a lot of the same tools to identify and compare loan options.
Used car loan interest rates
You might be wondering what the difference is between brand new car interest rates and used car interest rates. It would seem logical that since a used car costs less, the interest rate would be lower. That isn’t the case though; used car loan interest rates are usually a little bit higher than new car loan interest rates. This is because a used car is generally worth less than a new car, which means if you fail to pay your monthly bill, the lender won’t recover as much value from repossessing your vehicle.
So now that we’ve looked at how to find a good car loan interest rate and compared different lenders, you might be wondering how you can get the lowest rate. While there is no clear-cut easy answer, we have some tips to help you get the lowest rate.
How to find the lowest car loan interest rates
The first step to getting the lowest car loan interest rate is to shop around and see what options are available. Car loan interest rates are heavily based on your credit score. You should always check your credit score before making any major financial changes, like a car loan. If your credit score isn’t good you won’t be able to get the best car loan interest rate.
Another way to make sure that you get the lowest car loan interest rate is to watch the interest rates. Rates fluctuate from week to week and month to month. If you notice rates have been steadily decreasing (or increasing) you might want to think about getting pre-approved for a loan before the rates go up again.
Another little trick to getting the lowest car loan interest rate is picking the right time to shop. If you’re planning to take the loan from a dealership or a bank where agents receive commission on the loans they close, try shopping at the end of the month. When the end of the month hits, salespeople might be more motivated to close as many deals as possible in order to hit their quotas.
Car loan interest rates can be daunting. If you do the right research you can be confident you’re getting the best car loan interest rate available. Prepare yourself. Know your credit score and know the current rates.