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Tips to Buying the Best Car Loan for Your Vehicle

Updated on December 26, 2010

What to Know Before You Buy a Car or Truck

Tinted windows, dash mounted GPS units, and iPod ports are not the only things you should be looking for when you decide you need a new car. To save the most money, look carefully at your finance options. For the majority of people, a car loan is their next largest monthly payment, next to a mortgage or rent. As you may have the payment for several years, it is very important you consider how much the car will actually cost over the long run, not just what the sticker price is.

Things you will need: a copy of your credit report, several quotes from your insurance company, pre-approval at your bank

First stop and think - shop for a loan before you decide on the car and dealership. Reviewing your credit report before you go shopping for a loan can help you correct any errors on your report that may cause the loan rate to be higher than it should be. If you are a home owner, consider using a home equity loan to purchase your car – but only if the rate is better and you have equity in your home. If you have small balances on some credit cards, pay those before you apply for a car loan. It will help with your credit score and may buy you a lower rate.

Next - know how much car you can afford. Consider paying a larger down payment if it will lower the interest rate on your loan. If you are not yet set on a particular model, shop around for rebate programs, insurance discounts and lower registration fees for the different models you are considering. So many cars today are built to the same design; simply going for a similar model can save you hundreds on yearly vehicle costs. Checking the rate of stolen vehicles for your model may also help with insurance cost. Some models are stolen frequently; try to select a model with a low theft rate.

Then consider getting “pre-Qualified” at your bank or credit union. Shopping for a loan should be your first step to shopping for a car. The dealership should be your last place to look for a car loan. If you know how much money you can spend, it will allow you to effectively bargain with the salesperson. Knowing how much money you have available is the best bargaining tool there is. They want to sell you the car, but you need to set the limit. When you are pre-approved by your bank or credit union, you have the leverage – not the dealership.


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