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How to Get the Best Interest Rates in Your Car Finance

When it comes to securing a vehicle, negotiating actual car prices is only one part of the battle. Would you believe that sometimes you can save more with better interest rates even if the actual car price is a little higher? Yes, you can save hundreds, or sometimes even thousands, of dollars when purchasing your dream car by simply getting the best interest rates in your car loan. If you want to get the best interest rates for your car loan, check out these bulletproof tips.

Know your credit history

The first thing you need to know is what your credit health is truly like. Whether you’re from Australia, UK, or US, there are agencies that can help with this for a small fee. While it won’t exactly be what your lender uses to gauge your credit standing, it’ll be pretty close. The good news is that your credit score doesn’t need to be as high for a car loan as it needs to be for a mortgage. Just the same, knowing your credit rating is the first step in determining how much or how little your interest rates can be.

If you have good credit, shop for the total amount not weekly payments

One trick that lenders use to get you to borrow more money is by making the focus about the payments. The way they do this is by giving you “super low” weekly/fortnightly/monthly payments extended over a longer period. You think you’re getting a great deal, until you realise that you’re going to end up paying a couple of thousands more for your car. Remember that when considering regular repayments, do all your calculations privately.

If you have bad credit, get a co-borrower

When you’re trying to get a bad credit car finance, getting lower interest rates are a little trickier. The truth is that when your credit rating is bad, lenders will always give you a higher interest rate compared to someone with good credit standing. The trick is to get a co-borrower with good credit. What happens is that their assets and credit will be combined with yours in the application. This means that your chances of getting better interest rates are better, increasing your chances of getting a better deal.

Don’t expect the best interest rates

Remember that most of the “Super Low Interest Rates” deals are marketing ploys. With all of the Terms and Conditions attached to these types of deals, it’s nearly impossible to actually get them. Whether you’re getting a brand new car or a pre-loved one, chances are the car dealers you’ll talk to will mark up their loans anywhere from 0.6% to 2%. One trick is to let the lender know that you already have another offer. Maybe even namedrop a competing store. Chances are you’ll see a better rate.

Bring the papers home before ever signing anything

Whether you’re a lawyer or an average joe, you should always bring the loan paperwork home before signing anything. Don’t ever let any lender or dealer bully you into signing right then and there. Remember that you’ll be signing a binding contract that will last for years so you need to be sure that you absolutely agree to everything that is in it. If you have a hard time with all of the jargon, ask a lawyer or do a quick Google search at home. Here are a few things you should pay attention to:

  • Variable interest rate: If you can’t afford the highest possible payment for this deal, don’t push through with the loan. This just says that rates may change at any point.
  • Prepayment penalties: Most people prefer to just pay for the vehicle outright as soon as they acquire the money for it. Since lenders will make less if you do this, they normally give out penalties for early termination of contracts whether you want to purchase, sell, or refinance the vehicle.
  • Mandatory binding arbitration: All this means is that you relinquish your right to go to court for anything with regards to the contract you sign. Stay away.
  • The last thing you need to check for is if everything the lender promised you is in the contract. Promises can end up as lip service and without a binding agreement as proof, you won’t be able to chase after what you were promised.

Avoid contingent financing

Any financing that that says “contingent” or “conditional”, stay far away. This means your down payment amount, weekly/fortnightly/monthly repayments, length of loan, and interest rate can change to their discretion.