Tips to get the lowest car loan interest rate
When you’re on a budget, cutting costs is essential. One proven way to save money is to find things cheaper. Car loans are no exception. There are many ways to secure lower interest rate on your car loan, saving you lots of money in the long-term.
Forget about zero or almost-zero percent interest loans
Just because a car dealer or manufacturer advertises “zero percent,” or “1%” finance doesn’t mean they’re genuinely the lowest car loan interest rates. In most cases, dealers won’t let you negotiate a lower price for the vehicle and might trap you into unfavourable terms with high fees and short loan spans with big balloon payments at the end of the loan. These deals are often too good to be true. Stick to commercially available car loans from banks, brokers and car loan lenders.
Check – and fix – your credit history
Before shopping around for car finance, you should check your credit history. Do you think your credit history is 100% clean? Think again. Even if you’re confident you don’t have any blemishes on your credit report, you should always check your credit history for errors. This may save you a lot of money on extra interest. At the very minimum, lenders check your credit report to determine how much of a risk you are. The lower your risk, lower the interest rate. TIP: Don’t allow lenders to do credit checks when shopping around. More checks can influence your credit report negatively.
Save for a deposit
If you have a deposit, lenders will love you. Why? Because it reduces their exposure, otherwise known as how much “skin in the game” they have. This is another factor reducing your risk and in many cases, lowering your interest rate. If you can prove you have more assets than liabilities (debts) this can also work in your favour. Bring in pay slips, residential histories and bank statements to prove good financial standing.
Buy new, near-new or certified used
Buying a new car instead of a used car is more expensive on paper. In the long-term and for the purposes of lowering your interest rates, buying new is actually a sound investment. New cars are a sure-bet in the eyes of lenders. New cars aren’t prone to breakdowns and retain a bulk of their value, even after you drive it out of the dealership. Used cars are a liability and some lenders refuse to finance them. If they do agree, prepare for the interest rate shock.
Use a broker
The absolute best way to find a car loan with a low interest rate is to use a qualified and licenced car loan broker. Brokers access many lenders at the same time and do the shopping around for you. They can find loans with low interest rates and low fees, so you save more. Some brokers also find deals on insurance, so it’s possible to save on both!
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