If would be great if every loan came with zero percent interest, but lenders have to make money somehow. To keep from spending a penny more than necessary for car financing, do everything you can to keep the interest rate on your loan low. Here are some great insights to help you out.
Focus on the Length of Your Loan
While the overall monthly amount of your car loan makes a huge impact on your budget, you also need to pay attention to how long you’ll be saddled with that monthly bill and how much interest comes with it. To afford the car you’ve got your eyes on, you may have to take out a seven-year loan. This seems reasonable at first, but how much interest is bundled up in that seven years? Taking on a shorter loan with a bigger monthly payment may feel like too much at first, but run the numbers to see how much you’d be saving on interest over the years.
Consider Certified Pre-Owned Vehicles
Getting an older vehicle makes great sense if you’re looking to keep your monthly car payment as low as possible, but know that older vehicles can have higher interest rates than newer, more expensive cars. To find a good middle ground, consider a certified pre-owned vehicle to save money with a low interest auto financing. That way, you can get a fairly new car without paying the overall cost of a new car. If you’re lucky, you can time your shopping to when dealerships offer pre-owned selections at zero percent interest.
Check Your Credit Score and Report Before Going Shopping
Your credit score and report also go a long way in determining how much your interest rate will be. Be sure you not only know your current credit score but the current state of your credit report as well. There could be mistakes or outdated information on your report that harm your score or keeps you from getting a great interest rate.
Refinance Your Car
Once you’ve successfully secured auto financing, don’t stop there. Keep taking steps to get your credit score as high as you can as you’re paying off your loan. When your credit score improves, look into refinancing your loan to get a better interest rate than the one you had when you first purchased your vehicle. Know that there are some fees involved with refinancing, but they could turn out to be worth it. To make the most of refinancing, pretend you have the same monthly payment even if refinancing results in a lower amount. Paying the same each month allows you to take care of your loan faster and pay less interest overall.
Before you think about interest and financing, you first need to do what you can to drive the price of the car down as low as possible. Before heading to the dealership, do some research to determine just how much your dream car is currently worth. Combine that information with ways to cut out as many fees and extra costs that come with buying a car as you can. Once you and the dealership have decided on a price for the vehicle, you can then move on to how you’ll pay for it.
Interest is part of financing, but you have more control than you realize. Put these tips to good use to keep as much money in your bank account as you can when shopping for a new car.