Right Now Could Be a Great Time for an Auto Loan

Why wait for the car you need?

It seems like that no matter where you turn, there’s conflicting advice about when to get an auto loan. You should start shopping now, but wait a month! You should wait until next year! You should have started a week ago! But the truth is, currently, now’s likely the best time for you to get a car loan. But why now?

Overall Interest Rates Are Low

First of all, getting a car loan right now is surprisingly cheap. Many of us forget that we buy a car loan, just like we buy a car, and that the interest we pay on the loan is the payment we make for the privilege of borrowing the money. Currently, though, banks are practically giving away auto loans: a 60-month, or five year, loan has a 4.03% interest rate, and a 36-month, or three year, loan, is slightly lower at 3.95%.

Even better, now is the time of year when deals are to be had. If you’re looking to buy a car from the previous model year, many dealerships will have deals available. Essentially, you’re doing them a favor, clearing out stock that they’d otherwise have to pay taxes on. Similarly, being able to sell the car before the new year means that they won’t lose money on it due to other factors, and thus they may be able to offer you a better price than you might expect for a new car.

And, even if your credit score isn’t great, you might be able to negotiate that even lower.

How To Drive Down Interest Rates

First of all, it’s worth remember that everything, in auto loans, boils down to how you’re perceived in terms of risk. The higher risk a lender believes you to be, the more expensive your loan will be over time. But just because you’ve made a few mistakes in the past doesn’t mean you have to accept a higher price on your loan.

Before you apply, get your credit report and credit score. Your credit report can be requested once a year for free from the major credit bureaus: Experian, Transunion, and Equifax. Those may include your credit score, but if not, you can check your score through a variety of different tools, such as Mint.com. Having those materials in one place will allow you get a sense of how your credit will be seen, and also allow you to spot mistakes and other problems on your credit report that can be fixed.

Next? Go shopping. There’s no reason you have to get your car financed from the same place you buy it, and in fact that’s often not the best strategy. Even the best, most ethical dealership can only offer you one loan, the terms of which they often can’t even dictate. So, why not go out and look for lenders that will offer you a better deal? Collect quotes and compare them to find the lowest possible interest rate, shortest term, and least amount you need to borrow to get the car.

In other words, getting a car is relatively easy. You just need to be willing to do your homework, and shop around for both the car and the financing to pay for it.

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