Shopping for a car is a big decision for most consumers. After all, the average auto loan is now $26,691. Cars are often considered based on gas mileage, reliability, looks and what the neighbors are driving. But, shopping for a car loan is just as important. And, many consumers simply aren’t getting the best deal. The Consumer Financial Protection Bureau (CFPB) recently put together some tips on how to get the least expensive loan.
- Shop for a car loan before shopping for a car – When you decide to buy a car, there are several options when it comes to getting a loan. You can check with several banks, credit unions or other lenders to get a pre-approved loan. Get that pre-approval before you go to buy a car and take the pre-approval with you when you go shopping. Having a loan offer in-hand when you shop for the car puts you in a strong position. For most people, concentrating your applications in a short period of time can minimize the effect on your credit score. Any negative effect will be small while the benefits of shopping around could be big.
- When comparing loans, make sure you’re comparing all the terms – If you get competing offers from different lenders, including a dealer who offers you financing, you should take a close look at each of the loan terms, including the interest rate, amount financed, and length of the car loan. Some lenders may tell you they can tailor the monthly payments to suit your budget, but that could mean extending the lifetime of the loan. That could mean that you would still owe on the car when you are ready for your next car.