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9 tips to get a good deal on your first auto loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by offering interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct your own research and compare information for free to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies who pay us. This compensation can affect the way and when products are listed on this website, for example for instance, the order in which they may appear within the listing categories and other categories, unless prohibited by law for our loans, mortgage, and other home lending products. This compensation, however, does affect the content we publish or the reviews you see on this site. We do not cover the entire universe of businesses or financial offerings that could be accessible to you.

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6 minutes read. Published September 30, 2022

Written by Allison Martin Written by

Allison Martin’s work began over 10 years prior to that as a digital content strategist. Since then, she’s been published in several leading financial outlets including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.

Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since late 2022. He is a fan of clear reporting that helps readers confidently get deals and make best decisions for their financials. He is a specialist in small and auto loans.

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At Bankrate we strive to help you make better financial decisions. We adhere to the highest standards of journalistic integrity ,

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In 1976, Bankrate was founded. Bankrate has a proven track experience of helping customers make smart financial choices.

We’ve earned this name for more than four decades through demystifying the financial decision-making

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So you can be sure that we’re putting your interests first. Our content is created by and edited by

We make sure that everything we publish will ensure that our content is reliable, honest and reliable. Our loans editors and reporters focus on the things that consumers care about most — different kinds of lending options as well as the best rates, the best lenders, the best ways to repay debt, and many more. So you’ll be able to feel secure when making your investment.

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Bankrate follows a strict , so you can trust that we put your interests first. Our award-winning editors and journalists create honest and accurate information to help you make the right financial choices. Our main principles are that we value your trust. Our goal is to provide our readers with accurate and unbiased information. We have editorial standards in place to ensure that happens. Our reporters and editors thoroughly check the accuracy of editorial content to ensure the information you’re reading is true. We keep a barrier between our advertisers and our editorial team. Our editorial team does not receive compensation directly from our advertisers. Editorial Independence Bankrate’s editorial staff writes in the name of YOU – the reader. Our aim is to provide you the best advice to help you make smart financial decisions for your personal finances. We adhere to the strictest guidelines in order to make sure that content isn’t in any way influenced by advertising. Our editorial team receives no directly from advertisers, and all of our content is fact-checked to ensure accuracy. Therefore, whether you’re looking at an article or review, you can be sure that you’re getting reliable and dependable information.

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The process of buying a car to the very first time could be to be one of the most stressful events out there. With so many things to think about regarding the actual car and financing, the loan can fall to the side. Don’t let it. Securing a requires research -however, the more research you can do now you do, the better off your finances will be later. A low interest rate is the most important factor to an affordable car, no matter the vehicle you choose to purchase. 1. Be upfront about your budget. The most important factor when you purchase a car ought to be the cost. Weigh how much you will be paying each month as well as the total amount of interest you pay to . However, you must also take into account the maintenance costs you expect to pay for, insurance and fuel all are a factor in how much you spend. Experts suggest not spending greater than 10% of income on your car. Make use of an app to estimate the monthly installments and total interest paid. Then check resources like Edmunds as well as Kelley Blue Book to see the amount you will spend on the cars you are interested in buying. Key takeaway

Assess your financial situation to decide if you are not stretching your budget to the limit.

2. Keep in mind that longer terms are an increase in cost. The price of a car is rising. It’s not difficult to locate a loan that lasts six or seven years, however they have a major disadvantage. A longer loan duration does mean an lower monthly costwhich can be beneficial if you are on a tight budget -however, it also means greater interest being paid in total. Even if you purchase an affordable car, you can quickly become , or owe more than what it’s worth. For that first car loan opt for the shortest period you can afford every month. It may mean you have cut back on other areas, but it is by far the safest choice to avoid having to pay more for your car than it is worth. Key takeaway

You’ll likely save a bundle in interest with a shorter loan duration, and you can minimize the chance of becoming upside down on the car loan.

3. Check your credit report and score Your credit score will be the main factor lenders consider when determining your interest rate. To secure a great rate, you’ll need excellent credit. Also, you’ll require a track record of timely payments. If you’ve not been able to establish your credit score and history and history, you’ll have a tough getting a bargain. There may be a need to apply the car loan, which will mean more interest. If you’re able to put off paying for your vehicle loan make sure you build a history of on-time payments. A low ratio of debt to income lets lenders know that you’re able to handle your financial situation. Create a positive financial picture for your lenders to score a good deal. Key takeaway

Improve your credit score prior to applying for an attractive interest rate in the auto loan.

4. Choose with more than one lender Comparing lenders is as important as comparing cars for a great bargain. The types of lenders you can choose from include: If you’ve got a low to no history of credit you might be eligible for a first-time car buyer program offered by local credit unions. You’ll need to be an active member of the credit union to apply for loans, so inquire about ways to join before moving forward. Big banks: Customers who have an existing relationship with a traditional bank might be eligible for an auto loan. If you are a first-time purchaser, you may face higher rates. Internet lenders typically offer less stringent eligibility requirements than traditional banks. This is good news in the event that you don’t have a credit history or have a good score, however, you may expect a higher interest rate to offset the risk of default posed to the lender. Marketplace lenders online platforms feature an extensive network of lenders. Submitting an application shares it with the community so that you can view potential loan offers with lenders who may be a suitable match. The lenders you can use as captives: may obtain financing through a or the finance company belonging to the manufacturer of your vehicle. They typically offer auto loan programs specifically for currently enrolled students as well as recent graduates of college. Every lender offers different rates and methods to determine who will get which terms. It is critical to shop around and get in touch with several lenders. This will allow you to determine what you can qualify for, what you could spend and what you’ll be paying each month. Key takeaway

Shopping around helps ensure that you receive the top deal on an auto loan.

5. Preapproval is a must. an added benefit that is it could end up in a that lasts as long as 30 days. If you apply for preapproval, the lender creates an inquiry that isn’t going to impact your credit score. You’ll be able for a visit to dealers as well as test automobiles without the stress of needing to secure financing. Preapproval gives you the upper hand in negotiations. Dealer financing is usually expensive because dealers increase their rates to earn a profit. If you visit the lot with a preapproval form and a preapproval letter, you might be capable of negotiating a favorable deal on in-house financing -, if that’s your preferred route to take. Certain dealers offer the choice between or low-interest financing. If you’ve already achieved the best rates from another lender Your choice is clear: Reward yourself by recouping the cost. Key takeaway

Getting preapproved helps narrow the list of lenders you could consider and reduces the impact of your credit rating.

6. Choose between used, new or leased Lenders provide different rates on auto loans for . Lessors have their own method of calculating the monthly payment — called the factor rate — and you must investigate the factor rate before you take this step. If you’re planning on purchasing, know that new cars typically offer lower rates across board. However, new cars are also significantly more expensive and are likely to be less valuable due to depreciation. Thus, although you might pay more interest on a used vehicle but you can still save cash. The most important thing to remember

New vehicles generally have more affordable loan terms than used cars, but your total costs will be higher.

7. Check out manufacturer specials Most automakers offer first-time buyer programs. Some even offer special deals for students in college and recent graduates. If you’re planning on purchasing a brand new car or have the money as well as credit score to back it up, and are interested in financing through your home is a good idea to check if you could save a few dollars. Manufacturers may also offer rebates and leases with special terms on new models. Keep an eye out for these. You will be more limited in the items you can purchase and how you can pay for it. If you have a clear picture of what you’re looking for and have excellent credit, the manufacturer offers can save you money on the first car loan. The most important thing to remember

Contact the dealer to find out if you qualify for incentives on financing if you’re buying a brand new vehicle.

8. Make use of a co-signer or co-borrower If you don’t have great credit, a could of getting a bargain. The lender will take into consideration both scores of your credit when deciding whether to finance your vehicle. A loan to the vehicle, however you is liable for the loan in the event that you are unable to pay on time. A co-borrower, however, shares ownership of the vehicle and is equally responsible in the loan along with your. Whatever you choose to do the person you choose to borrow from, they must have excellent or good credit and a steady source of verifiable income that is in line with the lender’s minimum requirement to be approved. The most important thing to remember is

A co-signer or co-borrower can improve your odds of approval and enable you to secure an even better rate on an auto loan.

9. Make a large down payment Once you know the amount you’ll need, start that’s at least 20% of vehicle’s total cost. If you’re not able to pay this amount, try to make a down payment of at least 10%or whatever you can manage to afford. Consider using Bankrate’s to find the right amount for you. It may be tempting to buy the most expensive vehicle however, first-time buyers — and all car buyer must make a down payment to lower the amount they must finance. A larger down payment improves your chances of a good interest rate, reduces the amount you pay each month and reduces the amount of interest you’ll have to pay over the loan’s course. The most important thing to remember is

A bigger down payment can be eligible to receive better loan terms. Additionally, your monthly payments will be lower.

Next steps The most important thing to do to getting a good deal on your first car loan is to be open to shopping around and be patient. You can walk away with the best rate when you compare lenders, putting aside a down payment and improving the credit rating. Learn more

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Written by

Allison Martin’s work began over 10 years ago as a digital media strategist. Since then, she’s been featured in a variety of top financial media outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.

Editor: Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since late 2022. He values transparent reporting that allows readers to confidently find deals and make the most appropriate choices regarding their finances. He specializes in auto and small business loans.

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