How to Get a Low APR on a Car Loan

If you’re looking to get a car loan with a low APR, you’ll want to follow these tips. We’ll show you how to get the best rate on your loan.

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Introduction

Assuming you have good credit, there are a few things you can do to get a low APR on a car loan. APR, or Annual Percentage Rate, is the amount of interest you will pay on your loan each year, as a percentage of the loan balance. The lower the APR, the less interest you will pay over the life of the loan. Here are a few tips to get a low APR on your next car loan.

1. Shop around for the best rate. Just as you would shop around for the best price on a car, it’s important to shop around for the best APR. Talk to your bank or credit union first, but don’t stop there. Check out online lenders and see what kind of rates they’re offering. Keep in mind that the rate you’re offered may be different from the advertised rates, so be sure to ask what rate you qualify for before making a decision.

2. Get pre-approved for a loan before you go to the dealership. When you walk into a dealership with pre-approval in hand, you’ll be in a much better negotiating position. The dealer will know that you’re serious about buying a car and that you have financing lined up, so they may be more likely to give you a better deal on both the car and the financing.

3. Make a large down payment. A larger down payment will lower your loan balance and therefore your APR. If possible, aim for 20% or more of the purchase price as a down payment. This may mean saving up for awhile or trading in your old car to help offset the cost of the new one.

4. Choose a shorter loan term . A shorter loan term means you’ll pay off the loan faster and pay less interest overall. In general, opting for a 36-month loan instead of a 60-month loan will get you a lower APR (all other things being equal). Of course, this means higher monthly payments, so make sure it’s something you can afford before signing on the dotted line.

5. Have good credit . This one is pretty self-explanatory – having good credit will help you qualify for lower interest rates on just about everything, including car loans

How to Get a Low APR on a Car Loan

One of the most important factors in getting a low APR on a car loan is your credit score. If you have a good credit score, you will be more likely to get a low APR. Another factor is the type of car you are buying. If you are buying a new car, you will be more likely to get a lower APR than if you are buying a used car.

Research the Loan Market

APRs on auto loans fluctuate depending on a variety of factors, such as the type of vehicle you’re looking to finance and the health of the economy. Before shopping for your car, it’s important to research the loan market to get a sense of where rates are heading.

There are a few ways to do this:
-Check interest rate trends online. Websites like Bankrate.com and Edmunds.com track auto loan APRs and can help you identify whether rates are rising, falling or staying relatively static.
-Speak with a loan officer at your bank or credit union. He or she can tell you what rates you qualify for and may be able to offer suggestions for securing a lower APR.
-Contact your state’s department of banking or financial regulation. This agency can provide information on average auto loan APRs in your area.

Get Pre-Approved for a Loan

One of the best ways to get a low APR on a car loan is to get pre-approved for a loan before you start shopping for a car. Pre-approval means that a lender has reviewed your credit history and has decided to give you a loan up to a certain amount. This puts you in a much better bargaining position when it comes time to purchase a vehicle because you know exactly how much money you have to work with. It also allows you to comparison shop for the best interest rates.

Improve Your Credit Score

Your credit score is one of the most important factors in determining your eligibility for a low APR car loan. Lenders use your credit score to determine your creditworthiness, and the higher your score, the more likely you are to qualify for a low APR loan. If you have a poor credit score, you may still be able to qualify for a car loan, but you will likely have a higher interest rate. There are a few things you can do to improve your credit score, including paying your bills on time, maintaining a good credit history, and using a credit monitoring service.

Shop Around for the Best Deal

When you’re looking for a car loan, it’s important to shop around for the best deal. Talk to your bank or credit union first, but don’t stop there. Just as you would for a new car, compare rates from multiple lenders to ensure you’re getting the lowest APR possible.

Remember that the APR is not the only factor to consider when shopping for a car loan. Loan terms, fees, and other charges can all impact the cost of your loan, so make sure to read the fine print before signing on the dotted line.

Negotiate the Loan Terms

One of the most important things you can do to get a low APR on your car loan is to negotiate the loan terms with the dealership. Always remember that the dealership is not your friend — their goal is to sell you a car for as much money as possible.

That said, you can use their greed to your advantage by negotiating a lower interest rate on your loan. Here are a few tips to help you get started:

Negotiate the price of the vehicle first — This may seem counterintuitive, but it’s important to negotiate the price of the vehicle before you discuss financing options with the dealership. The reason for this is simple — the lower the price of the vehicle, the less money you will need to finance, and the lower your monthly payments will be.

Get pre-approved for financing — One of the best ways to ensure that you get a low APR on your car loan is to get pre-approved for financing before you go to the dealership. This way, you will know exactly how much money you have to work with and you won’t be as likely to succumb to pressure from salespeople who want to “help” you get financed.

Know your credit score — Your credit score is one of the most important factors that lenders consider when determining your interest rate. The higher your credit score, the lower your interest rate will be. So, before you start shopping for a car loan, be sure to check your credit score and work on improving it if necessary.

Comparison shop — Don’t just accept the first loan offer that comes your way. Instead, compare offers from multiple lenders (banks, credit unions, online lenders, etc.) and choose the one that offers the lowest APR. This simple step can save you hundreds or even thousands of dollars over the life of your loan.

Conclusion

Assuming you have good credit, you can get a low APR on a car loan by comparison shopping among lenders, including banks, credit unions, and online lenders. You can also give yourself a better chance of getting a low APR by having a large down payment and choosing a less expensive car.