Getting a Car Loan

If you’re like most car shoppers, you plan to get a loan to pay for your new car. Here are some tips to help you when you’re looking for a car loan: 
 

• Shop for loans before you head to the dealership. You may want to get pre-approved for a loan before you head to the dealership. That way, you’ll have a better idea of what kinds of cars you can afford.           

 

• Look for the lowest rate. Shop around for the lowest annual percentage rate (APR) and compare rates offered by the dealer, banks, credit unions, and savings and loan institutions.        

 

• Compare loans. Ask different lenders for information about the same loan amount, loan term and type of loan. Also, ask for a list of all costs and fees. Keep in mind that your monthly car payment will be determined not only by the interest rate, but also by the amount of your down payment and the length of the loan. 

 

• Determine overall cost. Monthly payments on a long-term loan will be lower than the payments on a short-term loan. However, the overall cost of the long-term loan will be greater and your equity in the car will build more slowly. 

 

• Weigh your options. Many manufacturers offer incentives such as cash-back rebates to encourage you to finance through their dealerships. Calculate whether a low-interest loan is a better deal than a cash-back rebate and dealer financing. 

 

• Get it in writing. Under federal law, you must be given the exact terms and total costs of your car loan in writing. 

 

• Find out your insurance coverage. Many lenders will attempt to sell you credit insurance, which would pay off your loan should you die or become disabled. Before you buy it, examine your coverage under you existing insurance policies. You cannot be forced to purchase credit insurance in order to secure a loan.