How to Get the Best Car Loan for You

For many people, getting a new car starts with a wish list of what kinds of cars you want with what kinds of gadgets and special features you want inside. It’s easy to buy into the fairytale of driving your dream car to the office and watching all your coworkers gawk in envy.

If part of your dream, however, is getting a good deal on the car loan you need to make the purchase, then you should probably follow a different set of steps.

If you’re wondering what those steps are, don’t worry, we’ve got you covered. Here are 10 tips to help you get the best car loan.

1. Shop for the loan separately

Before getting into the nitty-gritty of the exact car you want and the price you’re going to have to pay, start the loan application process with whatever lender you are interested in.

This could include your bank, credit union, online lenders, or even your auto insurance.

Typically, online lenders are thought to have the best rates at the moment, but that can vary depending on where your living and what your credit history is like, so make sure to do some snooping.

Ideally, you will be able to get approved for one, or multiple loans before you even head to the dealer. That way, you’ll be able to head to the dealership with a deal already in place.

If they want to offer you a loan from their lender, they’re going to have to beat the loan agreement you have already been approved for. This could lead to an even better rate – and greater savings in the long run.

2. Limit your loan shopping

After going over all the institutions that you can offer you a car loan, you might be tempted to spend loads of time on finding the very best deal.

It’s important, however, to keep in mind that every time you apply for a loan – even if end up getting approved for that loan – your credit score goes down.

That will make it slightly more difficult to get a prime-rate loan. If you make all your applications within two weeks to a month of one another, however, they all count as just one inquiry.

This will keep your credit score high, and your interest rates low.

3. Get to know your credit history

While we’re on the topic of credit scores, let’s talk about taking a deep dive into your own credit history. There are a few reasons why this is a good idea.

First off, it is helpful because to see what kind of loan you can expect to get based on your current score.

Secondly, you can check to see if there are any errors in your credit history that are bringing your score down. If you find errors, make sure to eradicate them before you start applying for car loans.

4. Keep your eye on the total amount, not the monthly amount

Focusing on the payments you will be making on a monthly basis rather than focusing on the entire amount you will pay over the entire life of the loan is definitely an easy mistake to make.

In fact, the only time you should really be focusing on the monthly payment amount is when you are calculating how much you want to spend for a car.

After that, don’t discuss the monthly payments. Some lenders will likely try to get you to focus on those numbers to get you to borrow more money by extending a repayment term.

What that means for you is that you’ll have to pay more in interest costs, and have to drive your car for longer. Doesn’t sound too good, does it?

5. Don’t assume you’re getting the best deal

As absurd as it may seem, lenders aren’t actually obligated to offer you the best rate that you qualify for. That’s why it’s important to use every bit of leverage that you have.

Much of that comes from letting a potential lender know that you are also looking at other possible loans, and are willing to walk away.

It’s even better if you already have an offer for a loan. That way you can take that to other institutions and ask them to beat it.

6. Find the right online tools

The internet hasn’t just made it much easier to find loans, it’s also made it easier to find out whether or not you are getting a good deal.

A simple Google search can open your eyes to whether or not your loan is actually a good deal for you.

7. Read the fine print

Before you sign anything, take the loan paperwork home and go through with a fine-tooth comb. If a lender or dealer tries to push back on your desire to do this, walk away.

This loan is a binding agreement that is going to have a long-lasting impact on your life, so it’s completely within your right to want to know and understand what it states. These are a few things to keep your eye on especially.

• Mandatory binding arbitration
• Variable interest rate
• Prepayment penalties

If any of these show up in your loan, you might want to think twice about putting pen to paper.

8. Make sure the math checks out

Make sure that the monthly payments match up with the loan terms that you agreed with. Do the calculations either on your own or with the help of an online auto calculator.

It’s crucial to make sure that the rates, terms, and payments you have to agree on are actually what is in the loan itself.

9. Never agree to conditional financing

Never agree to take a car from your dealer until the financing is finalized. That means everything from down payment, to interest rate, to payment term, and more is all figured out and cemented.

If the financing is conditional, that means that your lender can later change the terms so that they make more money off of you!

10. Make sure you can trust your lender

Before you sign anything, make sure that the lender you are considering signing with can be trusted. Check in with the Consumer complaints and queries page at Australia.gov.au and make sure that your lender can be trusted.

Do further searches online to see what customers and former customers have to say about the company.

While you should take these kinds of comments with a grain of salt, it can definitely give you a better idea of what to expect and whether or not you should sign on the dotted line.