Auto Financing, How to get the Best Deal

Auto Financing can be challenging even with a strong credit market, now that many lenders are tightening their qualification requirements, you may find the following tips helpful in getting approved for a used or new car loan.

The biggest hurdle to financing a car these days (besides getting approval) is to secure a good interest rate which is based on your credit score. You should get a copy of your credit score and keep it updated by contacting the three companies that report your score to potential lenders.  They are, Equifax, Experian, or Trans Union.  One way to get increase your score is to pay the balance down from old debt (be cautious not to pay all of your balances off, or it will be perceived as a credit risk and your score will actually go down.

Be aware that the best way to ensure that you get the best rate is to request a pre-approval from many different lenders to see which institution will offer you the best rate.  Banks can do a “soft pull” to check your credit without it showing as an inquiry.  If you have several credit checks done, your score could go down as a result, so always request a soft pull unless you are certain that you are approved by a particular company.

Make sure to thoroughly read the terms of the loan and be aware of penalties like pre-payment fees where you will get charged for paying your loan off early.

If your application is rejected try applying for a loan for a car that is less expensive, or save more money for your down payment.

The most important thing to remember in getting the best auto credit deal is to shop around, most people automatically assume that the dealerships have the best rate, but in fact, your credit union or local bank may be able to offer a better deal.

Having your financing ready before you shop for cars definitely gives you the upper hand when you are negotiating with the dealership to avoid being given a great price on the car you select, only to find out that the interest rate is higher.