With financial headwinds like a slowly recovering economy, continued job scarcity and rising gas prices, minimizing costs in every aspect of our lives has become a necessity. Unfortunately, automobiles are not concerned with our economic predicaments and when they break down completely and you are forced to purchase a new one, finding the best auto financing deal becomes a necessity.
Here Is How To Save On Your Auto Loan:
Make A Down Payment To Offset The Total Amount Financed
New cars lose about 25% to 30% of their original value once you drive them off the lot, and the last thing anyone would to be is upside down in their loan. Simply put, having a considerable down payment amount will not only help you avoid that, but it will also help minimize significantly the amount you will pay each month. If you do not have money for a down payment, and you can afford to wait for a while on the car, then it is recommended that you take time and save for one. Another great benefit of making a down payment is that it is also likely to result in you getting a better deal on your auto loan. If you do not have the cash and cannot wait, then you can consider using your old vehicle as a trade in value towards the new automobile. Do not forget to negotiate those terms too.
Refinance Your Higher Rate Loan
Anyone who owns a house knows that mortgage rates have dropped considerably and due to that, refinancing their house makes a lot of sense. However, what most people don’t know is that you can also refinance your vehicle. Not only does it reduce your monthly payment, it also minimizes the interest rate you are paying which allows you to pay your auto loan sooner. Automobiles depreciate very first, hence making it important for you to pay off your auto loan quickly.
How much will refinancing saving you? Assume you received a 60 month loan of $16000, at 21% interest because you had a less than perfect credit score. This auto loan will cost you about $440 every month and you will end up paying over $10,000 in interest within the 60-month period. On the other hand if you were to refinance and get a 7 percent interest, the payment will drop to about $325 per month and you will only pay slightly over $3,200 in interest. What would you do with the extra $115 every month? Hint, add it your auto payment to get it paid off faster!
Shop For The Loan Before You Shop For The Car
The auto loan is arguably a more essential purchase than the vehicle itself. Even though the interest rate environment is relatively low at the moment, there is still some room for lower rates which will result in less cash out of your bank account.
Start with your bank, but also look around at the rates of other lenders including credit unions. You can also apply for a pre-approval and bring it with you when you go to purchase the vehicle in question. This will give a bargaining leverage when negotiating the price of the automobile.
Before signing any deal, spend some time shopping around for the best rates, as even another dealer might offer you a lower interest rate.
Tighten Up Your Credit
Terms of your auto loan are usually based on your credit score. If you have a high credit score, you are likely to receive a lower interest rate. If you do not, you are likely to pay more because of you questionable credit history. But if you have problems with you credit history, and do not need to buy a car immediately, consider waiting until when you credit score increases. Even a small decrease in your interest rate will save you a lot of cash in the long run.
There several ways to save money on your auto payments, but the final word of advice is not to rush the process of purchasing a vehicle. From the beginning to the end, weigh all you options and you will definitely make the right choice.