Finding the best interest rate on your car loan can make a difference of thousands of dollars. Unfortunately, advertised rates often vary depending on your credit history. It's easy to compare car loan rates once you get a quote from several different lenders.
Calculate how much of your personal savings will be used for the down payment on your car. Don't be afraid to use your disposable savings to make a larger payment. Paying more upfront can allow you to have a shorter loan and pay less in interest.
2
Visit as many financial institutions as possible to keep your options open. Remember that not all loans will be pre-approved and you'll have to go through an application process at most banks and credit unions.
3
Investigate each company that you don't have a working relationship with. You might assume that your bank won't cheat you on a loan, but some smaller lenders will try to take advantage of you. Check with the Better Business Bureau if you have any doubts about the reputation of a credit lender.
4
Get your interest rate quotes as annual percentage rates (APR). There are many ways to express interest rates, but APRs are the most widely used and make for easy comparisons.
5
Use a financial calculator to quickly account for all the different aspects of a car purchase. There are many free auto-loan calculators online, like the one at Bankrate.com (see Resources below).
6
Look at the loan results side-by-side after you've run them through the calculator. Make your decision based on things like which loan has the lowest interest rate and your estimated monthly payments. You may want to copy and paste the results into a spreadsheet program to easily compare them.
Tips & Warnings
Be realistic when you calculate your monthly payments. Assume that you will be able to only make minimum payments most of the time.
Use the same repayment length for each loan comparison.
You can't compare different interest rates if they aren't expressed in the same way. For example, a monthly interest rate must be multiplied by 12 in order to compare it to an annual rate that is compounded monthly. Some of these calculations can get complicated, which is why you need to ask for an APR.
