Get a Car Loan from a Bank, Not from an Auto Dealer
Most people fail to consider what kind of financing they need when purchasing a new car. Often borrowers end up taking out loans from the car dealer by default and end up paying unnecessarily high interest rates on their loan. If you do your homework ahead of time and set your financing up early, you can save hundreds of dollars in interest over the course of your loan.
Most car dealerships will be more than happy to set you up with a loan on a new or used car. In fact, many of them will be very pushy about you financing through them. Many of them won’t give you certain incentives unless you borrow through their financing department. Dealerships are quick to provide loans because they stand to gain far more on financing your vehicle than actually selling it to you. Loans from auto dealerships can come at much higher interest rates and less favorable terms than if you had gone down to your bank ahead of time.
If you do know that you want to finance a car, do some research and come up with a few different models and a price range for what you would like to finance. Take a trip down to your bank or credit union and speak with a banker. Tell them what you’re hoping to do and they should be able to give you a quote. If you’re dealing with one of the nation’s mega banks, it’s probably also worth talking to a community bank to see if you can get a better deal locally. Make sure that you have your financing ready to go before ever walking into a dealership.
You can also get better interest rates by looking online. There are a number of banks, credit unions and finance companies that will offer you much better rates than a dealership would. Checkout resources like Car Finance 247 to learn what type of offers are available.
When financing a car, you’ll have a number of different options to choose from on the rates and terms. Ultimately your goal should be to pay off your car loan as quickly and easily as possible. Don’t sign up for more than a 36-month loan. Individuals that get 60 month loans often find themselves in situations where they need to get rid of their car, but can’t because they owe more than what the car is actually worth to the bank. Have a nice down-payment on your vehicle and get as short of a term as you can afford and you won’t have to worry about being upside down on your vehicle. You can use tools like a financial calculator to determine how much you should borrow and what it will cost you to do so.
Ultimately, the best way to buy a car is to pay with cash, but not everyone can do that. If you do have to finance a car, borrow as little as possible and pay it off quickly.
