There are several ways to save money on an auto loan. The following are a series of tips almost any driver can use to get lower car loan payments:
Organize Independent Financing
It is possible to save large amounts of money by using an independent lender to find financing. Auto financing provided by car dealers is usually more expensive as they are often able to obtain more money from the financing than from the sale. Numerous dealers will ask what payments you are able to afford each month and then try to use a car loan calculator to see how much they can convince you to sign for. This gives them the ability to increase the interest rate in order to increase the amount that they will be paid.
Be Wary of Loans with No Interest
Although this sounds like an attractive option, they are probably not the best choice especially if you are giving up your right to a large rebate. Contrary to popular belief, a sizable rebate would actually be more beneficial and save you more money per month than an interest-free auto loan.
Be Aware of your Credit History
Before you choose a loan, make sure that you are familiar with your credit history, your credit report, and your credit score. These reports often contain inaccuracies which will need to be corrected in order to get the best loan. Additionally, if you are aware that you will need to buy a car in the near future, you should take any steps you can to improve your score. Lenders typically determine the auto loan rates based upon the credit score. Therefore, having a better score will drastically improve the quality of the loan.
Use the Equity on your Home
When searching for auto loan financing, using your home’s equity is often a great idea. A home equity loan or a equity line of credit often has lower effective rates of interest than auto loans because they are able to be secured against the home’s value. Home equity interest is also typically tax deductible if it is itemized on the federal tax return. A tax adviser should be consulted before using this strategy but the savings could be substantial.
It is important to note that before you attempt to secure the auto loan against your house, you should make sure that you understand all of the risks which accompany this decision. Because you have chosen to use your home as a form of collateral, you must ensure that you have the discipline it takes to make sure that the payments are made on time. If you miss a payment, you may be required to sell the home.
Consider Leasing Instead of Buying
Auto Leasing has become an increasingly popular notion since the 1990’s. It enables people to afford cars with a lower monthly payment than they would otherwise pay if the car was purchased up front. Since payment is not required for the entire vehicle, the monthly payments are usually significantly less than typical auto loan monthly payments. Leases for new cars can be found for $200 or even less. However, there is a definite downside to this plan. After the lease has ended, there is no resale value.
If you are willing to consider the lease option, make sure that you thoroughly research the different leasing options to find special deals. Ensure that you read all of the lease’s terms, including the parts about the fees, sales tax, and monthly payments. Additionally, you should also consider whether a large down payment will be made up front so that you will be able to pay less each month.
It’s also important to understand the cost of car insurance before committing to a car loan. Upgrading vehicles or simply buying a newer model can often cost you more in car insurance always understand your total monthly financial obligation for a new car before committing to financing. Most drivers opt for a car insurance comparison search online which can quickly help you compare rates for any vehicle.
Buying or leasing car can be an exciting moment no matter what your age but always do your best to try and save money when adding a car loan payment to your monthly obligations.