Save On An Auto Loan

By David Plowman

When purchasing a new or used car, many of us think that obtaining the car financing is just one part of the purchasing process. The car dealership will no doubt have a financing package available, so its best to discuss the terms and conditions of the auto loan package along with negotiating the price and deciding what sorts of options to take, many of us think.

Well, turns out that's not the best approach, according to many financing experts. It's a strategy that could cause you to pay too much for both your car and for the auto loan itself. Instead, you're likely to get a better deal if you consider financing your new car and purchasing it as two completely separate processes.

By pre-qualifying for an auto loan you are able to shop for the best rate and don't have to rely on the dealer's financing package. Just as important, if you walk in to a dealership already knowing you are pre-qualified for an auto loan, you will be in a better position to negotiate the best price on the car, knowing you won't have to worry about financing,

Remember, finding the best interest on your auto loan could literally save you a thousand dollars or more. For example, on a typical 48-month loan, each percentage point you shave from an ARP equals savings of a little more than $20 per $1,000 of your auto loan. That may not sound like much, until you do the math. Say you find one auto loan with an ARP of 9% and another of 5% on a $19,000 car. By taking the lower interest rate, you save $1,040.

There are several places you can shop for competitive auto loan rates. Your bank, credit union or an internet-based lender may offer all reasonable rates.

Even after shopping for the best auto loan rates, you may still find that your dealer offers the best rate, especially if they are offering low interest financing to its qualified buyers as a promotional tool. If that's the case, definitely take their option. You have gained a competitive advantage just by having done your homework and knowing what financing options are available to you.