How to Get Car Loans With the Lowest APR

Do your homework on financing before arriving at the dealership

Securing a low annual percentage rate (APR) on your auto loan can significantly drive down monthly payments. For example, a consumer financing a $15,000 vehicle for 60 months, at 7.99 percent APR will pay $304.07 per month, according to Bank Rate. However, if the consumer secures an APR of 5.99 percent, two percentage points lower, the monthly payments decreases to $289.92 per month. Investing time in researching the lowest auto loan rates will ensure you maximize your savings each month.

Instructions

1. Get a copy of your credit report. The lowest APRs are typically reserved for applicants with the highest credit score. For this reason, it's important to know where you stand. Order a free credit report online. Review credit reports from all three credit bureaus, Experian, Equifax and TransUnion. If you find inaccurate information on the report, contact the reporting bureau and file a dispute form. This will ensure your credit score is accurate.

2. Shop for the lowest auto loan rate. Online comparison tools allow consumers to compare auto loans across the country. First, enter your credit rating and desired loan term. The tool will provide the lowest APR based on the criteria.

3. Consider choosing a shorter loan term. If you can afford a higher monthly payment, choosing a shorter loan term will significantly drive down your total financing costs. The APR on shorter loan terms is usually better as well.

4. Ask the dealership to match the rate. If you prefer to get financing at the car dealership, bring your research. Ask the finance department to match, or beat the lowest rate to secure your financing business. However, when reviewing your finance contract, watch out for extended warranties and other items (if you didn't purchase them) on the financing agreement.

Tips & Warnings

• Consider talking with credit unions when comparing auto loan rates. These financial institutions are member owned, which means they return profits to members with lower interest rates.

• Watch out for extra fees. Application fees and prepayment penalties can add up. Negotiate these fees and conditions with the lender. If two financial institutions are offering the exact same rate, this can help you make the decision.

References

• Automobile.com: How to Find the Lowest Auto Loan Rate
• Bank Rate: Loan Calculator

Resources

• Annual Credit Report: Order a Credit Report
• Bank Rate: Compare Auto Loan Rates