Get a Good Deal On Your Auto Loan

June 18, 2008

Getting a good deal on your car loan is a little more complicated than car dealers would have you believe. The key to getting a truly good deal on your car loan is patience. Don’t be so anxious to own that little red sports car that you find yourself jumping at the first offer that seems viable - and, then, ironically unable to enjoy the very vehicle that you bought, because you’ll be under a mound of debt.

More specifically, the key to staying prudent when looking for a loan to buy a car is threefold. First, be cautious when car dealers give you interest-free loan offers. Second, look at different lenders. Don’t just rely on the car dealer to give you a loan - also look at the loans available from, for example, your bank. Third, don’t get so caught up in getting a good deal on your loan that you forget to look at the price of the car itself.

Why shouldn’t you immediately snap up an interest-free car loan, if the dealer offers it to you? The fact is, a loan with no interest doesn’t immediately the best deal.

The reason you have to have excellent credit to qualify for an interest-free loan is that you’re typically expected to pay off the loan in less than three years. Thus, if you have taken an interest-free car loan, you’re going to be making huge monthly payments on your car. For example, say you take out a $20,000 loan to buy a car. This hypothetical loan has a 0% interest rate, but must be paid off in three years. You are going to be paying $555 a month on your car. Add the cost of gas and insurance, and you’ll be paying close to $1000 a month on your car for three years - for that money, you could be renting an 1-bedroom apartment in Manhattan.

On the other hand, if you took out the same loan of $20,000 at a 3.9% interest rate, to be paid off in five years, you’ll only be paying $367.43 per month. Sure, you’ll be paying more money total. However, depending on the kind of income you have, the lower monthly payments may be more manageable. Factors such as your income and intended lifestyle must all be considered when you’re looking for auto loans - don’t just look at one set of numbers.

With this in mind, consider many different lenders for your auto loan. Don’t just immediately agree with the loan the dealer offers you, enticing though that option may be. Often, your bank or a credit union will offer you a deal that’s just as good, or better - if you take the time to look. This way, you’ll get a sense of what kinds of deals you can get on loans. Then, you can be sure if a car dealer is giving you a fair offer, or if the dealer is trying to take advantage of you.

Finally, devote as much effort to haggling over the price of your car, as you do to haggling over your auto loan rates. Car dealers expect to negotiate over price. There is a huge amount of money to be saved by not ignoring this essential part of buying a car.

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Comments

2 Responses to “Get a Good Deal On Your Auto Loan”

  1. Incredible Cars » Rhinebeck classic motorcycle, truck and farm equipment show pt 1 on June 18th, 2008 5:38 pm

    [...] Get a Good Deal On YourAutoLoan [...]

  2. Thomas on August 4th, 2008 1:41 pm

    Car dealers are taking huge losses at the moment and will offer huge discounts - I just saved $4000 on the marked price of my new SUV coz they can’t sell them. It actually works out cheaper than other smaller cars even with high gas prices

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