Auto car loans are very similar to home mortgages in that they require you to make monthly installment payments. You must be aware of certain things when looking for a dealership, however. Many people make the mistake of thinking that all lenders are created equal and can offer car loans with varying interest rates and fees.
There are many differences between auto loans and home mortgages, even down to the level of interest and service charges. You should carefully consider any dealership that offers new car financing. If it is a known brand, this may help your chances of getting pre-approved for a great deal. Lenders will look at your credit history to determine if you are a risk, but also at the value of the vehicle you plan to purchase. This means that even though the interest rates may be low on a car loan, it could be priced so high that the monthly payments are unaffordable.
Your credit history affects the interest rate based on several factors. The most important of these factors is your payment history. Since lenders use this to determine your likelihood of making a payment, they will charge you with a higher interest rate than they would on someone who has good credit. Another factor is the amount of available credit that you have. If you have a lot of available credit and if you frequently use that credit, then you are likely to get better interest rates than someone who has a smaller amount of available credit or no available credit.
When you visit a dealership, ask the salesperson for the best interest rate based on your situation. Remember that each situation is different, and it is difficult to know which lender to go with on a long term basis. Some salespeople may be more inclined to offer leasing, since it is a good way to get a car payment made over time. It can also allow a person to build up a credit report. If you lease a vehicle from the dealership, you can only take care of the monthly payments, so you do not have to worry about having payments at the end of the lease or beyond.
Another option for financing is a pre-approved loan term. The credit reporting bureaus do not always approve financing on the same terms as the loan terms you agree to when you apply for financing. They may report you as a late or non-payor or in some cases they will report you inaccurately. If you do receive pre-approved financing terms from the dealer, you will probably pay significantly less than what you would pay with a loan directly from the lender. This makes it possible for you to make your payments on time without feeling pressured by dealerships or financing salesmen.
Credit unions are a different story. They can be very picky when it comes to approving financing. While some dealerships have relationships with credit unions, there is usually a very large financial investment required for a dealership to do business with one. Even if a dealership does have a relationship with a credit union, most dealers do not and this can often mean that credit unions will not provide any funding for your new vehicle purchase.
One last option for financing is a dealership finance option. Most dealerships will work with a finance company that works in conjunction with the lenders to provide you with an affordable monthly payment. The good news is that this arrangement will likely result in higher interest rates because the finance company will have access to a much larger base of buyers. Unfortunately, however, this arrangement does not work in all cases. If the dealership does not have enough buyers, it is not uncommon for them to pass those higher interest rates onto you. In addition, it is not uncommon for those higher interest rates to be accompanied by prepayment penalties and other fees which can make it impossible to pay down your car loan in full.
Car loans are one of the things people need the most during these hard economic times. Finding a good deal on a car can be difficult, but if you take your time and shop around, there are many options available to you. Take the time to compare lenders to find out who offers the best deals and then carefully review their terms and conditions. By doing so, you will be able to choose a lender that can offer you a car loan with the best average auto loan rates.