Finding the lowest cost car loan

What You Need to Know Before You Shop for an Auto Loan

by Debra Karplus

A CNBC report states that Americans purchase a car every six to eight years. It's estimated that 8 in 10 new car buyers finance part or all of the purchase. Buying or trading a vehicle can be stressful. Add in the number gymnastics that car dealers present when it comes to financing your purchase, it can be totally mind-boggling. But there are some strategies that can simplify the process of finding an auto loan.

Know your numbers before you drive over to the dealer's lot.

Find out what the car you want and the car you have is worth. Go online and research desirable vehicles, the features you want, and costs. If you plan to trade in your current car, learn its trade-in value, typically based on its age, mileage, and condition. There are many online calculators that can assist you with this task. and can help you with calculators.

Financing vehicles is big business for lenders.

The profit on financing a car can be greater than the profit on the car itself. Therefore, you need to shop as carefully for the loan as you do for the car. That means doing some research.

Before going car shopping, check your credit score. Look for any errors that could lower your score. Work to correct them before you go shopping for a loan.

Then contact a few local banks, starting with the establishment that handles your checking account and other personal finances, and discuss their rate for an auto loan. Stress your relationship with the bank and tell them that you'd like to do the business with them.

Related: Buying an Insurance Friendly Car

Don't let them confuse you with a bunch of numbers. Here are the relevant ones:

  • How much you're financing (including fees)
  • How much you're paying in fees
  • How long the loan is for (how many payments)
  • How much is each payment
  • How many dollars you'll be paying in interest over the life of the loan
  • What happens if you pay early (are there prepayment penalties?)

If you have answers to these questions, you'll be able to compare loans without any confusion.

Look for a loan online to get some competitive rates.

Now that you're armed with some facts, you can face the dealer and their finance manager (aka salesperson). You can compare their offer to what you saw earlier and choose the best rate.

Don't feel any obligation to finance it at the dealer. Some disreputable dealers might refuse to sell a car without financing it. Walk away from them. They were trying to take you.

Remember that borrowing less and paying it off quicker will reduce the cost of your loan.

You can successfully negotiate both a car purchase and an auto loan. Just do your homework before you go shopping and don't let anyone confuse you or pressure you into a quick decision. You'll be glad when you're driving a car you want at a price that you can afford.

Reviewed October 2017

Debra is an occupational therapist, accountant, teacher and freelance writer. She is a writer for Advance for Occupational Therapy Practitioners. She also writes for Grand Magazine, has some items (fiction and non fiction) selling on (kindle), has written several travel articles for the Champaign-Urbana News-Gazette and several articles for and volunteers as a money mentor for the University of Illinois Cooperative Extension money mentoring program. Learn more about her at

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