How to Shop for a Car Loan

For most people, purchasing a car means a car loan. Ideally, it would be best not to incur debt when purchasing a car, but this is often not possible. If you are shopping for a car loan, take the time to investigate all options and gather enough information to enable you to make an informed and wise decision.

Difficulty: Moderately Easy

Instructions

1. Determine how much financing you can afford to incur. An auto loan should be satisfied within three years for the best financial results.

2. Contact the bank you hold accounts with and inquire if pre-approval is possible. Also ask if your bank offers reduced interest rates for customers utilizing automatic payments or if there are any other discounts you might qualify for. After calling your bank, contact several other banks for comparison purposes. Make notes of all the rate quotes you get so you can compare them to the auto dealership rates when you start car shopping.

3. Be prepared to provide your current income and proof of income during the pre-approval period or at the point you sign the loan papers.

4. Begin car shopping when you have your financing settled. Compare the loan information you gathered with the financing available at car dealerships so you can make the best financing decision.

5. Consult the lender you decide to use when you have found an automobile. Typically, the lender will provide you with a check to give the auto dealership to make the purchase. The auto dealership will transfer the auto title to you with an addendum noting the lien.

Tips & Warnings

• Always try to negotiate a selling price. Auto dealers might be more willing to negotiate with buyers who have not financed with them because of the decreased financial risk. If you have a car, it will likely be more financially beneficial for you to sell it privately instead of trading it in. If you still have an outstanding loan on a vehicle, be sure to keep this loan separate from a new loan. In a tightening economy, automobile buyers who have good credit might find themselves in a position of more options as dealerships have fewer buyers.
• Have any automobile checked by a mechanic before purchase if you do not possess adequate knowledge about cars.

References

• Auto Loan Shopping