Guest Blog: Auto financing: Three keys to the best loan rate

By AutoNation Direct

1. Shop around before you make your purchase.
   Compare interest rates at various financial institutions, such as banks and credit unions, as well as the dealership. It’s often an advantage to be preapproved for a loan so that you can keep the financial arrangement out of the vehicle-price negotiations. The figure to focus on is the annual percentage rate (APR), which can vary from day to day.  You can get a quick read on the prevailing rates at such online sites as Bank Rate Monitor (www.bankrate.com), Lending Tree (www.lendingtree.com), E-loan (www.eloan.com), or the manufacturer site of the brand of vehicle you are considering.
2. Keep an eye on the total cost of the loan.
   The term (duration) of a loan determines your monthly payment and the total purchase price of the vehicle. A shorter term for a loan means higher monthly payments but less money paid overall. Try to keep the length of the loan as short as possible. A three-year loan costs you far less overall than a four- or five-year loan at the same interest rate. For instance, if you borrow $20,000 at 7.5 percent APR for 36 months, your monthly payment will be $622 and the total interest you will pay over the life of the loan will be $2,396. If you finance the same amount at the same interest rate for 60 months, your monthly payment would be only $401, but you’d end up paying a total of $4,046 in interest. You need to balance the total cost of the loan against a monthly payment you can afford. 
3. Remember, your credit record affects your interest rate.
   If in doubt, check your credit score before you start looking for a loan. Having a sterling credit score can get you a better interest rate than having a poor score. The 0% rates, for instance, are typically available only to buyers with good credit scores. You can check your credit record online at Equifax (equifax.com), Experian (www.experian.com), Trans Union (www.transunion.com), or My Credit (www.mycreditfile.com). If there are errors, it’s advisable to fix them before you apply for a loan. Many lenders and dealers will work with buyers who are considered credit risks, but such loans have a much higher interest rate. Cleaning up any credit problems before you buy should pay off with a lower interest rate.

**Article provided by AutoNation Direct, a CWCC Member Automotive Buying Service – to learn more, call 866-548-2201 and identify yourself as a CWCC member or visit the website at www.AutoNationDirectCentral.com. Employees and their family members are also eligible to participate in the CWCC Program.

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