Four Tips for Vehicle Purchase Loans
1. Credit Score
Your credit score
will directly affect your interest rate. The higher your credit rating the
lower the interest rate and likewise the lower your credit score the higher the
interest rate. To a lender the lower the credit rating the greater the risk
that the purchaser will default on the loan. The difference can vary quite a
bit, as much as 10 to 15 percentage points. If your credit score is low and you
don't need to purchase a vehicle right away, take some time and improve your
credit scores. In the long run you will have saved yourself thousands of
dollars. There are many helpful sites on the internet that can help you to
improve your credit scores.
2. Shorter Terms
Lower Interest Rates
Lenders view longer
term loans as a higher risk than shorter term loans, banks offer a lower interest
rate for purchasers who will to agree to a shorter loan period. If you are
looking for the lowest auto loan rate possible choose a loan that has the
shortest repayment time period.
3. Dealerships
Sometime Profit on Interest Rates
In addition to
dealerships earning a profit when sell a vehicle they can also be earning money
when a buyer finances a vehicle from one of their "preferred
lenders". In these cases the lenders may allow the dealership to charge
the buyer a higher interest rate which can be as much as 2 to 3 percentage
points and the dealer keeps the difference. So in addition to shopping around
for the perfect vehicle remember you can shop around for the perfect loan for
your budget.
4. Negotiate for
Rates
You can negotiate
for a lower interest rate, if you have good or excellent credit you have more
room for negotiation. If you feel the interest rate being offered to you is too
high most likely it is. If negotiations don't work out take your car loan to a
major bank. If you are a member of a credit union even better, generally credit
unions offer their members better rates.