Do you qualify for a zero percent offer from an auto manufacturer during the 2010 model year clearance sales that are taking place across the country? Only 1 in 20 new car buyers do. If not, you’ll be happy to hear that interest rates on car loans are continuing to drop.
According to Bankrate.com, 5-year new car loans have dropped from an average of 6.95 percent a month ago to just 6.78 percent now. Used car loans are also lower, too. In fact, 3-year loans for pre-owned vehicles were 7.67 percent in mid-July. They have since slid to 7.56 percent.
No matter what your credit score and which loan tier you qualify for, new and used car shoppers need to be smart when buying their next vehicle. For some, making a good deal is the difference between being approved for your car loan or not. Making sure you get a low selling price is the first step. However, many buyers fail to make sure they get the lowest interest rate possible on their car loan. Paying a few interest points more than you should can cost hundreds, even thousands of dollars more than necessary.
There is a single step that all buyers can take to make sure they save money on their next car loan:
- Get pre-approved before you step onto the car dealer’s sales lot. In this way you’ll have something to compare the dealer’s interest rate to. If the dealer’s quote is high, then stay with the financial institution that provided the pre-approval. If the dealer is low, take his offer to save even more money.
What If You Aren’t Pre-approved?
Walk into the dealership knowing your credit score. This will give you some measure of control, especially if the dealer attempts to “pad” the “buy rate,” or add points to the interest rate you actually qualify for.
Also, don’t get caught in focusing on the monthly payment while at the dealership. This is an old trick. Focus on the selling price of the car, then the interest rate you’re paying. Follow these steps and your payment will be as low as possible. If you fail to negotiate them separately, well, that’s how car dealers make extra profit on any given deal.