Your monthly car payment consists of both the principal on the loan, and the interest paid to a lender. While you may have little control over how much you pay for the car, you do have control over your interest rate. Let’s look a little closer at the best reasons to shop around for a car loan and how to get a better deal on your vehicle.
Look for the Best Rate
Talking to a local lender may make it easier to get the best rate on a loan. Those with bad credit may get better terms from an online lender compared to at a dealership. Coming to a dealer with a loan in hand may also offer you more leverage during negotiations.
Get Leverage Over the Dealership
You don’t have to accept the loan offer you got from a credit union or online bad credit lender. However, it does guarantee you can get the car you want, even if the dealer wants to play hardball. In most cases, you have 30 days to accept financing terms offered by an outside lender.
Know Your Budget Ahead of Time
If a credit union offers you $10,000 for a car, it should be a sign that this is what you can afford to spend on a car. In many cases, car dealers will try to sell you a car based on the affordability of the monthly payment, which rarely reflects the affordability of the car itself.
Check Your Credit Ahead of Time
Your credit score will play a major role in the loan terms that you may be offered. Applying for a loan before going to the dealership gives you an excuse to check your credit ahead of time. Doing this reduces the odds that a dealer tries to tell you that your credit is bad because you will know whether this is true or not.
The Lender May Check the Condition of the Car
A lender may ask for a vehicle history report prior to making the loan. This may help you find out if it has been involved in any car accidents or has other damage. Ultimately, this may also help you make a better decision about your next vehicle purchase.
Shopping around for a car loan can provides a variety of benefits. In addition to getting a lower interest rate, it can also help you determine how much you can afford prior to going to a dealer. This may help you get a good deal regardless of the tactics a salesperson may try to use.