Getting the Lowest Car Rate Loans is crucial to saving money over the life of your loan. Your interest rate depends on several factors, including your credit score, the car you’re buying, and the size of your down payment. As of Q3 2024, the average rate for a new car loan was 6.61%, while used car loans averaged 11.74%. This guide provides actionable strategies to help you secure the most favorable financing.
Strategies to Get the Lowest Car Rate Loans
Improving your credit score is a significant factor in securing a lower interest rate. A LendingTree study revealed that raising your credit score from fair (580-669) to very good (740-799) could save you over $39,000 in interest. However, there are other effective strategies to consider:
Leverage Pre-Approval
Getting pre-approved for a car loan before visiting a dealership empowers you with knowledge of your approved loan amount and interest rate. This information allows you to negotiate effectively with dealers, potentially securing a lower rate or a better out-the-door price.
Negotiate Effectively or Bring a Negotiator
Negotiating the purchase price is essential, unless you’re at a no-haggle dealership. If you’re uncomfortable negotiating, enlist a skilled friend or family member to assist you. This can also be helpful when dealing with add-ons like cosmetic packages and warranties.
Utilize Comparison Services
Shopping around for car loan rates can be tedious. Using a comparison service like LendingTree simplifies the process by allowing you to compare offers from multiple lenders with a single application.
Explore Credit Unions
Credit unions often offer some of the lowest auto loan rates. Membership may be required, but the potential savings can be significant. Research credit unions in your area or online to compare rates and membership requirements.
Plan Ahead
Avoid waiting until your current car is unusable before shopping for a replacement. Being desperate for transportation can lead to accepting unfavorable loan terms.
Utilize Car-Buying Services
Your bank or credit union might offer a car-buying service, potentially providing rate discounts or simplifying the car-buying process. These services often allow for easy comparison of car deals in your area.
Seek Out Promotions and Rebates
Car manufacturers often offer captive financing with special promotions for military personnel, college students, recent graduates, and even employee relatives. Explore these options for potential discounts.
Make a Down Payment
While not always required, a down payment reduces the lender’s risk and can help you secure a lower interest rate.
Choose a Shorter Loan Term
Longer loan terms (e.g., 84 months) result in lower monthly payments but typically come with higher interest rates. Opting for a shorter term can save you money on interest.
Consider Holiday Car Shopping
Historically, holidays and year-end periods offer opportunities for 0% APR car deals, especially with captive financing.
Plan for Car Insurance
Remember to factor car insurance costs into your budget. Get insurance quotes before finalizing your car purchase to avoid surprises and ensure affordability.
