Purchasing a new vehicle requires more than just deciding what type of car to buy and how much to pay. Unless you have a lot of cash saved and can buy the car up front, you will have to decide upon some financing.
Before choosing a car finance company, you will want to compare prices and rates. While it is convenient to have the car dealership set up your loan and payment plan, in most cases, this is not the best option. A dealer will submit your credit information to several lenders, but this does not mean you are getting the best deal. A car dealership’s priority is to make money, and they will pick the lender, which offers them the best commission. However, their commission is based on the interest rate that you are charged.
Car dealerships have business relationships with banks, credit unions, and other types of finance companies. The finance company allows the dealership to increase the amount of your interest rate. The extra amount you are charged in interest goes to the dealership in exchange for your business. The dealership makes a profit, the lender gets their original asking interest rate, and the customer ends up paying too much in interest charges.
Online lenders offer low-interest rates
Applying for a car loan online is one of the best ways to lower your interest rate. Besides having a good credit record, which all lenders will check when applying for a loan, an online loan is your best bet in obtaining a low-interest rate. By applying for a loan online, you are saving the lender’s time and money. The savings from the cost of doing business are passed on to the customer.
Usually, if you apply for your loan online, the lender will want you to sign up for an automatic payment plan. After filling out a form, your car payments will be automatically deducted from your account. This prevents the lender from having to process as much paperwork, and the loan payment is always made on a specified date.
Don’t be pressured by salespeople
Even if you have already been pre-approved for a car loan, don’t let an eager salesperson force you into making a decision. Many will use excuses to lure you into purchasing the vehicle that same day.
If they are willing to offer you a deal on a car today, chances are they will offer you a deal of equal value next week. Before you decide on a car and sign the loan papers, make sure you are happy with both the vehicle and your financing terms.