How to Get a Car Loan
- by: Patrick Peterson
- June 11, 2020
If you are in the market for a new or used car, you’re likely going to need a car loan to help pay for it. However, the rates and other terms of your car loan can make a dramatic difference in what you ultimately pay for that car. Here is what you need to know about how to get an auto loan and how to finance your purchase.
What to Consider When Purchasing a Vehicle?
Before you even think about getting a car loan, take into consideration these:
- Think about what type of vehicle you want to purchase. Are you looking for a car, truck, or SUV?
- Do you need space for extra passengers or cargo?
- Do you need a vehicle that gets better gas mileage for short trips or long-distance jaunts?
- The mileage: if the vehicle is otherwise great but has high miles, it may not last as long as you need it. Vehicles only last for a certain amount of time.
- Do not limit yourself to one particular model, brand, and year, since you will have more options available if your criteria are not as restrictive.
- Your credit score.
Once you have a general idea about the type of vehicle you want, you can start looking up the going rate for similar vehicles in your area. You can do considerable research on a vehicle before ever seeing it in person or making an offer. For example, many car websites list the VIN for their vehicles, so you can look up the VIN to find information about safety issues, recalls, problems with the title, or other issues. You can also review the vehicle history report, which lists the history of owners, maintenance records, law enforcement records that mentioned the vehicles, and many other important details about the vehicle’s history. Some car dealerships include a copy of this report on their website.
Auto Loan Rates By Credit Score
Your credit score is going to be the factor that has the biggest impact on your car loan rates, so it is helpful if you can get your credit score before you go shopping for a loan. If you have any errors in your report or some things you can address to raise your score, it may be worth taking care of these things first before getting the loan. Your credit score can change in less than a month, so a higher score can mean the difference in percentage points on interest on your car loan or may make the difference of whether you are approved for a loan at all.
When considering how much car loan you can afford, also consider the other costs associated with car ownership, including personal property taxes, tags and registration, parking costs, insurance, and fuel costs. All of these things will impact your budget, and you do not want to overextend yourself financially.
How to Get Preapproved for a Car Loan
It is best if you can walk into a dealership with preapproval. This means that you have already secured the loan and agreed to the terms ahead of time. This makes you close to a cash buyer since you do not have to depend on the dealership to get the loan for you.
Getting preapproval for an auto loan gives you a maximum cap on what you can spend for the purchase. You can also avoid having to simply take what the dealership offers you.
Some ways to increase your chances for preapproval for an auto loan include:
- Start with a lender with whom you already have a relationship, such as your bank
- Get preapproval from more than one lender
- Shop around online for the best deals; some sites even let you select the terms you want and have lenders make you offers
- Read the fine print; the advertised rates are usually only for customers with the best credit, so be sure you are aware of the interest rate and terms that will apply to you.
What to Look for When Buying a Car?
Now that you know how to get a car loan and have your preapproval in place, you can begin the shopping prices. Compare prices from multiple dealerships and look up Kelley Blue Book value on a vehicle before you make a purchase. If you are going to be trading in your own vehicle, be sure that you also look up the trade-in value so that you get a fair deal on it.
When looking at potential vehicles you may purchase, look at the exterior and interior of the vehicle. This can help you spot cosmetic damages that may impact the value of the car or even notice potential issues that may cause mechanical problems. The interior of the vehicle can also give you an indication of how well the previous owner took care of the vehicle.
You should also test drive any vehicles you are interested in. This can sometimes give you a better indication of how the vehicle handles and whether there may be potential problems with the vehicles. Test out all the dials, the air conditioner, heater, and lights. Also, check for any leaking fluids or sounds.
If you have not received information on the vehicle’s history up to this point, ask for it now. Also, request repair records. If you are able to and the dealership allows it, take the vehicle for an inspection. Even if you have to pay a little more out of pocket, getting an inspection from a reputable mechanic who is not affiliated with the dealership can potentially help you save thousands of dollars by not making a bad purchase.
Remember that this decision may impact you for several years so take your time on the lot and don’t rush into anything.
The information explained here can teach you how to get a car loan. You can use this knowledge to your advantage to get a good deal at the dealership. Good luck and happy shopping!