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9 tips to get a good deal on your first auto loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering you financial calculators and interactive tools, publishing original and objective content. This allows you to conduct research and compare data for free - so that you can make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies who pay us. This compensation can affect the way and when products are featured on this website, for example for instance, the order in which they be listed within the categories of listing, except where prohibited by law. This applies to our mortgage, home equity, and other home lending products. However, this compensation will affect the information we provide, or the reviews that you read on this site. We do not include the vast array of companies or financial offerings that could be available to you.



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6 min read Published September 30 2022
Written by Allison Martin Written by

Allison Martin's career began more than 10 years ago as a digital media strategist. She's been published in several leading financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.







Editor: Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate from late 2022. He believes in the clarity of his reporting, which helps readers easily find deals and make the best decisions for their financials. He specializes in small business and auto loans.









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Making plans to purchase a vehicle for the first time is one among the toughest situations available. With so many things to think about regarding the actual car, the loan can fall to the wayside. Don't let it. It isn't easy to find a loan -and the more you do now, the better off your financial situation will be in the future. Low interest rates are the only way to an affordable car, regardless of the vehicle you choose to purchase. 1. Be honest with your budget The biggest concern when buying a car should be the price. Be aware of the amount you pay each month and the total amount of interest you pay to . You should also think about the maintenance costs you expect to pay for as well as insurance and fuel costs. All contribute to the amount you spend. Experts advise not spending greater than 10% of earnings on your car. Utilize an estimate tool to calculate monthly payments and total interest paid. Then check resources like Edmunds or Kelley Blue Book to see the amount you will spend on the cars you are interested in buying. The most important thing to remember is
Examine your financial situation to decide if you are not stretching your budget too thin.


2. Remember that longer terms mean more expensive vehicle is increasing. It's not difficult to find a loan that lasts for six to seven years but they have a major downside. A longer loan term does mean a lower monthly payment -this could be advantageous if you are trying to stay within your budgethowever, it also means greater interest being paid in total. Even if you buy an inexpensive vehicle, you can quickly become debt-ridden or owe more than it's worth. For that first car loan pick the shortest period you can afford every month. It could mean you need to reduce your spending in other areas, but it's by far the safest choice to avoid being liable for more on your vehicle than it's worth. Key takeaway
You'll likely save a bundle in interest with a shorter loan time frame, and you can minimize the risk of getting upside down on your car loan.


3. Review your credit report and score. credit score is the main element that lenders take into account when determining your interest rate. In order to get a fair rate, you'll need an excellent credit score. Also, you'll need a history of on-time payments. If you've not had the opportunity to improve your credit score or history, you'll have a harder time finding a good deal. There may be a need to apply the car loan, which will mean more interest. If you're able to put off paying for your car loan make sure you create a record of punctual payments. A lower ratio of debt to income shows lenders you can handle your finances. Make a strong financial case for lenders to get an attractive deal. The most important thing to remember is
Improve your credit score prior to applying for an attractive interest rate on the auto loan.


4. Find for more than one lender Comparing lenders is as critical as comparing cars for a great bargain. The types of lenders you can choose from include: : If you have a poor to no history of credit you could be qualified for a first-time buyer's program by a local credit union. You'll need to become an active member of the credit union in order to qualify for loans, so inquire about ways to join before moving forward. Big banks: Customers who have an established connection to a conventional bank may be eligible to receive an auto loan. As a first-time buyer it is possible to pay more expensive rates. Online lenders: Online lenders generally provide less stringent eligibility requirements that traditional bank. This is a good thing if you lack credit history or have a good score, however you should expect a higher interest rate to mitigate the risk of default to the lender. Marketplace lenders platforms have a vast network of lenders. When you submit an application, it is shared with the network so you are able to view possible loan offers from lenders that could be a good match. The lenders you can use as captives: may also secure financing through a or the finance company belonging to the manufacturer of your vehicle. They typically offer auto loan programs for current students and recent college graduates. Every lender offers different rates and ways to determine who will get which terms. It is critical to research and make an application with a variety of lenders. This will allow you to determine what you qualify for, the amount you are able to spend, and how much you can expect to pay each month. The most important thing to remember is
Doing some research will help ensure that you get the best price on a car loan.


5. Preapproval is a must. an added benefit that it will likely end with a period of as long as 30 days. If you apply for preapproval, the lender will issue a soft inquiry that won't have an impact on the credit rating of yours. It gives you time go to the dealer and test automobiles without the stress of needing to secure financing. Being preapproved gives you an advantage in negotiations. Dealer financing is usually expensive since dealers increase their rates to make profits. If you visit the lot with a preapproval form that you have signed, you could be able to negotiate a good deal on in-house financing -- if that is the way you'd like to go. Some dealers also offer the option of low-interest financing. If you have already been able to get unbeatable rates with another lender, your option is simple: reward yourself by recouping the cost. The most important thing to remember
Getting preapproved helps narrow the list of lenders you could consider and also reduces the effect of your credit rating.


6. Decide between new, used or leased Lenders have different rates for automotive loans for . Lessors have their own method of calculating the monthly payment which is known as the factor rate and it is important to investigate the factor rate before you take this step. If you plan on buying, know that new cars typically offer lower rates across spectrum. However, brand new vehicles are also more expensive and decrease in value more quickly due to depreciation. Therefore, even though you'll have to pay higher interest rates on used cars however, you could still save money. What's the most important takeaway
New cars typically come with more competitive loan conditions than used vehicles, but your total costs will be more expensive.


7. Find specials offered by the manufacturer. Many manufacturers offer first-time car buyer programs. Some offer discounts for college students and recent grads. If you are planning on buying a new car, have the income and credit to back it up, and you are looking for financing in-house is a good idea to see if you can make a profit. Manufacturers can also offer rebates and special leases for new models. Be on the lookout for these. You'll be limited in what you can buy and how you can afford it. However, if you have a clear picture of what you're looking for and have excellent credit, the manufacturer specials could make a difference on the cost of your first auto loan. The most important thing to remember
Contact the dealer to determine whether you're eligible for incentives on financing if you're buying a new car.


8. Utilize a co-signer, or co-borrower. If you don't have stellar credit, a could of getting a bargain. The lender will look at the credit score of both parties in deciding whether or not to finance your vehicle. A to the vehicle but is liable for the loan if you cannot pay on time. But, a co-borrower shares ownership of the vehicle and equal responsibility to the loan together with the borrower. Whatever you choose to do, the individual should have excellent or good credit and a steady source of verifiable income that is sufficient to meet the lender's minimum threshold for approval. The most important thing to remember is
A co-signer or co-borrower can improve your odds of approval and help you get a better deal on an auto loan.


9. You should have a substantial down payment. Once you've figured out the amount you'll need, start that's at least 20 percent of your car's total cost. If you can't afford this amount, aim for an amount of at least 10% -- or whatever you can afford. Consider using Bankrate's to find an amount that is suitable for you. It may be tempting to buy an expensive vehicle, but first-time car buyers -- as well as every car purchaser should use a down payment to reduce the amount they have to finance. A bigger down payment can increase your chances of a good interest rate, reduces the amount you pay each month and reduces the amount of interest you'll be paying over the loan's course. Key takeaway
A higher down payment may make you eligible for more favorable loan terms, and your monthly payment will be less expensive.


Next steps The key to getting a good deal on your first auto loan is to stay in the game and compare. You could get a competitive rate by comparing lenders, saving up on a down payment and improving your credit score. Learn more


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Written by

Allison Martin's career began more than 10 years ago as a digital content strategist, and she's since been featured in a variety of top financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.



Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since the end of 2022. He believes in transparent reporting that allows readers to easily find deals and make the best choices for their finances. He specializes in small and auto loans.











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