Best car loan interest rates are offered to consumers with the highest credit scores. While this is common knowledge, there are several things a consumer can do to ensure they get the best value despite the interest rate on their car loan. Checking their credit score before shopping for a car, attempting to prequalify for a car loan before the consumer goes to the dealer, and postponing the purchase of a car are three things that can help a consumer get the best deal for their credit and dollar.
Timing of the purchase of a car is as important as a consumer’s credit score on how much is paid for a new or used car. At the end of the sales month, most dealerships are looking to meet sales goals and may be more willing to negotiate. While this doesn’t affect your interest rate, it does affect the interest over time. When a dealer lowers the amount of money a consumer pays for a car, the principle of the loan is less and that will be reflected in both the interest over time and the monthly payment.
In addition to timing the purchase of a car with the end of a sales month, timing the purchase of a new car with the end of a model year can also lower the cost of the vehicle. As early as spring and as late at fall, manufacturers will release the new model year cars. Researching when a manufacturer releases their new models can also lower what a consumer pays for their automobile. The release of a new model year spurs most car dealers to move older models to make room for the newer models being shipped to them.
By pulling their own credit score prior to attempting to qualify for a car loan, a consumer should be able to determine if their score is high enough to get a car loan. Car loans can be obtained by consumers with what is considered “subprime” credit scores, these are scores that fall between 500 and 600, fewer and fewer car loans are extended to those whose credit fall in this range. Consumers with credit in the deep subprime and subprime often end up with high interest rates on overpriced vehicles.
Consumers with non-prime credit (scores between 601 and 660) and prime credit (scores between 661 and 780) have a much easier time of securing a car loan. Loans to consumers with non-prime credit are generally a few interest percentage points higher than those whose credit fall within the range considered prime. In more recent years, more and more car loans have been extended to consumers in the non-prime and prime ranges of credit scores.
By shopping around and prequalifying for a loan, a consumer can ensure that they have the best interest rate and best loan terms available to them. Prequalifying for a loan allows a consumer to look for a car with the financing already in place. This is less for the dealer to do and gives the consumer more leverage when it comes to negotiating the cost of the car which in turn lower the interest paid on the loan over time.
At times a consumer cannot postpone the purchase of a car. To get the best car loan interest rate in situations like this, it is important to maintain a healthy credit file. It is also important to keep your credit score high.
Best car loan interest rates are offered to consumers with high credit scores. Consumers who don’t have pristine credit can still get a car loan, but their loans will have a higher interest rates and cost more in interest payments on their loan. Some ways to help limit the interest costs is to limit the cost of the initial purchase price of the vehicle. Timing a purchase with the end of a sales month and the beginning of a model year will increase the chances of getting a good deal on a car. Prequalifying for a loan makes it easier for the consumer to determine if the loan terms and interest rates are the best for the consumer. For a consumer to get their best car loan interest rate, it takes careful planning and patience.
Image credit: Sergey Soldatov