How to Find the Lowest Auto Loan Rate

Finding the Lowest Rate for Your Auto Loan

Everyone wants to find a great deal, especially those in the market to purchase a car.

However, it seems that most consumers dread this component of the new car buying process: the negotiation. Nervous they might be outwitted by a sly sales person at the dealership, many car shoppers tend to accept the sad fact that they just will not get the best deal possible. Instead, they might aim for ‘good enough.’

But ‘good enough’ should not be enough – it is possible to get the lowest rate on your car loan. It just takes some planning and research.

A Slow Economy Equals a Buyer’s Market

The news has been pretty consistent – the automotive industry is not doing so well. In fact, vehicle sales in the United States for April were more than 30 percent below levels reported a year ago, according to automotive experts Edmunds, Inc.

As a result, auto manufacturers are increasing available incentives to convince hesitant car buyers to make a purchase. In fact, Edmund’s monthly True Cost of Incentives report estimated that the average incentive in the United States for April was $3,031 per vehicle sold, representing a 29 percent increase over April 2008.

These incentives have included everything from employee-pricing specials to zero interest rate loans, demonstrating that if you are in healthy financial situation and can afford a new car, right now might just be the best time to get the best deal.

Step One to Finding the Lowest Auto Loan Rate: Check Your Credit

While many car shoppers might wait until they are sitting in the dealership’s Finance and Insurance Department to worry about what their credit scores might be, finding out your credit score should be the first step you take when purchasing a car.

Essentially, the better your credit score, the better rate you can get on your auto loan. However, having a good credit score is not enough – you have to know what that number actually is. While most reputable auto dealerships will not tell you a bold-face lie, they could refrain from being too forthcoming if it means they could make an additional profit on your sale by charging you a higher-than-necessary interest rate, and your best defense to this sales tactic is to come to the dealership fully prepared.

The best time to check your credit score is 60 to 90 days before you plan on making your purchase. The reason behind this advanced prep work is if you should find anything inaccurate or out-of-date on your credit report, correcting the information could take that long to resolve.

Other Steps to Take to Secure the Best Auto Loan Rate

Secure financing before going to the dealership. When negotiating with a dealership, you can gain significant ground by walking in with sufficient funds to purchase the vehicle you are considering. The dealership might offer a better rate in order to get the financing business from you as well. You can obtain and compare some of the best auto loan rates online.

Find out what the current prime interest rate is. The prime interest rate is set by the federal government, and lenders generally base their auto loan rates on it. If the prime interest rate is low, you can expect to be able to negotiate a low interest rate on your auto loan.

Shop around at numerous dealerships. The more dealerships you visit, the more likely you will get the best deal on your auto loan. In addition to auto manufacturers competing with each other, dealerships that sell the same makes and models often compete among themselves, increasing your chances of creating a bidding war for your business.