Auto loan rates fluctuate just like any other interest rate. The better your credit rating the lower your used car loan rate will be. But if you have little to no credit or bad credit, all hope is not lost. You too can get a car loan with interest rates to fit your budget.
1. Credit Unions
Credit unions tend to offer the best overall used car loan rates. It may take a little effort to join a credit union, but it pays off. Consumers Credit Union offers some of the lowest interest rates for borrowers regardless of customer credit level.
2. Shop Around
When you’re looking to finance a used car, do some comparison shopping first. Even if you’re purchasing from a used car lot, you don’t have to go with their financing. Often dealerships raise APRs to boost their profits. Just get pre-approved for a loan for what you want to spend before you go car shopping.
3. Veteran Status
This option doesn’t apply to all borrowers, but if you are a veteran or current military member, you are likely to find better car loan rates and prices. Between the discounts and the financing perks, veterans typically fare well when buying a car. If you are a first responder, you may also be eligible for better financing rates.
If you do any shopping around before heading to the car lot and have some loan offers already in hand, you are in the perfect position to negotiate a better rate. After choosing your used car, and listening to their offer, ask the dealership to beat your lowest pre-approval offer. If they can’t you have better financing ready.
5. Private Party Auto Loan
Buying a used car from a private seller opens you to the option of a private party loan. They offer easier financing and leave out the dealership markups. Although these loans tend to have higher APRs, you can get one of these loans from large banking institutions, credit unions, and online lenders. There may also be certain criteria that the vehicle being financed must meet.
6. Set Your Budget
Know how much you can afford before you choose a loan or a car. Just because you can get a loan for a certain amount, doesn’t mean that it will fit within your budget. Because used cars tend to need more maintenance, it’s a good idea to shoot for less than 20% of your monthly income. An online car loan calculator can be helpful.
7. Know Your Credit Score
Get your credit score before you start shopping. This will help you to know what kind of loan rates are realistic for your situation. There are plenty of free options, and many of them also offer you credit repair or credit maintenance suggestions. If there’s anything that you can address immediately to raise your score, do so.
Now that you know what you can do to improve your chances of finding a budget-friendly used car loan rate, you can now car shop with greater confidence. Buying or leasing a vehicle doesn’t have to be an unpleasant ordeal. Hopefully, your biggest worry will be what car to choose.